HUMAN CAPITAL DEVELOPMENT AND THE ECONOMIC GROWTH IN NIGERIA

HUMAN CAPITAL DEVELOPMENT AND THE ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study shows the relevance of human capital development to the growth of the economy. It evaluates human capital development and economic growth in Nigeria by adopting conceptual analytical framework that employs the theoretical and ordinary least square (OLS) to analyze the relationship using the GDP as proxy for economic growth; total government expenditure on education and health, and the enrolment pattern of tertiary, secondary and primary schools as proxy for human capital. The analysis confirms that there is strong positive relationship between human capital development and economic growth. Following the findings, it was recommended that stakeholders need to evolve a more pragmatic means of developing the human capabilities, since it is seen as an important tool for economic growth in Nigeria. Also proper institutional framework should be put in place to look into the manpower needs of the various sectors and implement policies that will lead to the overall growth of the economy.

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

The concept of human capital according to Woodhall (2003), refers to the fact that human beings invest in themselves, by means of education, training, or other activities, which raises their future income by increasing their lifetime earnings. Economists use the term “investment” to refer to expenditure on assets which will produce income in the future, and contrast investment expenditure with consumption, which produces immediate satisfaction or benefits, but does not create future income. Assets which will generate income in the future are called capital. Traditionally, economic analysis of the investment and capital tended to concentrate on physical capital, namely machinery, equipment, or buildings, which would generate income in the future by creating productive capacity. However, a number of classical economists, notably, Adam Smith pointed out that education helped to increase the productive capacity of workers, in the same way as the purchase of new machinery, or other forms of physical capital, increased the productive capacity of a factory or other enterprise. Thus, an analogy was drawn between investment in physical capital and investment in human capital.

It is worthy to note that since the time of Theodore Schultz (1960s) the concept of human capital has dominated the economics of education and has had a powerful influence on the analysis of the labour market, wage determination, and other branches of economics, such as the analysis of economic growth as well as expenditure on health care and the study of migration. For it is recognized that these also represent investment in human capital since they can help to determine the earning capacity of individuals, and therefore increase their lifetime incomes. In light of above, human capital is seen as an important factor used in converting all resources to mankind’s use and benefit. Economists observed that the development and utilization of human capital is important in a nation’s economic growth. In any case, no country can achieve sustained economic development without substantial investment in human capital.

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HUMAN CAPITAL DEVELOPMENT AND THE ECONOMIC GROWTH IN NIGERIA