THE IMPACT OF HUMAN CAPITAL INVESTMENT AND ECONOMIC GROWTH IN NIGERIA

THE IMPACT OF HUMAN CAPITAL INVESTMENT AND ECONOMIC GROWTH IN NIGERIA

This research proposal is aimed to examine the impact of human capital investment and economic growth in Nigeria. While the specific objectives of the study are to;

1. Examine the effect of investment on health in the gross domestic product in Nigeria.
2. Determine the influence of investment education in the gross domestic product in Nigeria.

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CHAPTER ONE

1.1 Background of the Study

Human capital investment is a more recent phenomenon in economic history since the inception of endogenous growth models in the 1980s. Prior to this, developing countries had focused more on the acquisition and accumulation of material and physical capital in a bid to achieve rapid economic growth with less or no attention to the importance of human capital investment in the growth and development of an economy.

By definition, human capital investment helps to understand the importance of investing time and money into education, health, and training opportunities for the citizen of a country. The relevance of human capital investment cannot be underemphasized as it gives meaning to production which promotes growth. The success of any economy is a function of the quality of human capital the economy proud itself on. More so, the human capital role has been recognized by economists to be a valuable asset and an important pre-requisite in achieving growth. Lucas  (1988), through his studies, had earlier observe that human capital investment has contributed immensely to the growth of an economy which can be achieved through increasing knowledge, skills, and capabilities acquired through education and training by the citizen of a country.

According to Chuksi (1995). The world summit on social development attended by about 100 heads of states has since placed a high relief on the issue of investment in human capital to alleviate the problem of poverty.

A developing country’s major challenge has been to improve the quality of life of her citizen which can be achieved through the provision of stability and enabling environment for growth and investing in the countries citizens in the areas of education, health, retention among others.

Human capital investment has been identifying both at the organizational and national levels to lead to higher and more growth, better health, and more education of the coming generation. It has been observed that the rate of return on investment in human capital is much higher than investment in the traditional sector like infrastructure, transport, and agriculture. Chuksi, (1995) put the rate of return of investment in primary education in developing countries at 18%. Within the past decades, emphasis on infrastructural investment has been replaced by human capital investment with the World Bank playing a major role through her various organs in ensuring that programs that will increase the educational ability of nations and enhance their standard of living are rolled out on annual basis as it is the largest single source of external financing for investment in human capital in ensuring that they achieve their aim of helping developing countries reach the point where the limit to investment in human capital no longer hold back growth potentials.

1.2 Statement of the Problem

The concept that investment in human capital promotes economic growth actually dates back to the time of Adam Smith (1776) and the early classical economists who emphasized the importance of investing in human capital. Sustained economic growth accompanied by social development is one of the notable macroeconomic objectives of every country and in this regard, human capital is deemed as an essential ingredient.

Therefore, human capital has gained significant importance in growth theories. However, its measurement is not addressed properly in economic literature. Various researchers have utilized different proxies for human capital, for instance, Mankiew et al. (1992) utilize secondary education enrollments. Barro and Lee (1993) have used average years of schooling. The existing literature on human capital reveals that while acknowledging the role of human capital in economic growth, macroeconomists express human capital solely in the form of education whereas micro economists consider health as another important component of human capital beside education. Micro economists believe that health plays a significant role in the formation of human capital because, in order to ensure growth in productivity, people need to be healthy or protected from sickness. It means health and education both are primary ingredients of human capital formation.

It has been discovered over time that the value of Nigeria’s gross domestic product does not translate to the general wellbeing of the citizens. There is an increase in the inflation rate, unemployment, and insecurity. In Nigeria today there are a host of graduates and non-graduates that are unemployed due to a lack of skills (Okereke and Ofierohor, 2018).  The lack of training has affected the productivity of the country since people cannot do what they do not know. The life mortality rate in Nigeria is ranked as one of the highest in the world due to the non-priority of health financing in Nigeria. Nigeria is a place where leaders travel out for treatment owing to the poor health facilities in the country Odior (2011).

However human capital theory as well as endogenous growth theory suggests that there are substantial economic effects of education on the micro and macroeconomic level. The interrelationship between education and economic growth has been the subject of debates, enjoying a wide interest since the era of Plato. According to Dikens et al. (2006), Tofik (2012), and Barro (1991), education has a high intrinsic economic value since the investments in education led to the formation of human capital, which is one of the causes of economic growth.

According to Stevens and Weale (2003), life quality has substantially increased in the last millennium in most countries of the world, and particularly in European countries, the development of the educational field has been contributing to it. One of the main motivations for studying education from an economic point of view is its impact on reducing income inequalities (Ram, 1990), and the relationship between education and the labor market (Benito and Oswald, 2000). Hence this study tries to access the nature of the relationship between human capital investment and the economic growth of Nigeria.

1.3 Aim and objectives of the Study

The aim of the study is to examine the impact of human capital investment and economic growth in Nigeria. While the specific objectives of the study are to;

1. Examine the effect of investment on health in the gross domestic product in Nigeria.
2. Determine the influence of investment education in the gross domestic product in Nigeria.

1.4 Research Question

1. How has an investment in education contributed to the economic growth of Nigeria?
2. Does investment in health have any impact on the economic growth of Nigeria?

1.5 Research Hypothesis

1. H_O1 There is no significant relationship between investment in the health and economic growth of Nigeria.
2. H₀₂ There is no significant relationship between investment in education and the economic growth of Nigeria.

1.6 Significant of the Study

This work will be of importance to the following categories of people;

1. The General Public:- The findings of this study will equip the general public with the knowledge of the relationship between investment in human capital and economic growth in Nigeria
2. The Academicians:- The findings of this work will help those in academics who tend to take up research work in the area of human capital investment and economic growth as it will contribute to their literature.
3. The Policy Maker:- The policymakers like the various government agencies who will use the findings of this study to channel investment in areas that will contribute to the growth of the economy.

1.7 Scope of the Study

The scope of the study is discussed in two separate points:-

(a) Geographical Scope:- This work is centered on Nigeria’s economy and data for the analysis will be collected on the central bank of Nigeria statistical bulletin.

(b) Content scope:- This aspect of scope covers the literature of the study which contain the theories reviewed, the concept of human capital investment, the relationship between human capital investment and economic growth, and the empirical review