THE IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH BAJON DAA USENI

THE IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH BAJON DAA USENI Tel: +234-904-738-9822 Email favourdaausenibajon@gmail.com ABSTACT This paper examined the impact of human capital development on growth of the Nigerian economy. The study employed ordinary least squares technique due to its scintillating features and reliability in measuring of linear relationship between variables included in the model (BLUE) and data for the period 1986-2017 were used. The model for this study will be theoretically stated as: Gross Domestic Product (GDP) is a function of Government’s Expenditure on Education (GEE), Government’s Expenditure on Health (GEH) as well as Oil Revenue (OILRV). Changes in Gross Domestic Product, Government’s Expenditure on Education, Government’s Expenditure on Health, and Oil Revenue were used as variables. The results indicate that human capital development in Nigeria is severely underdeveloped resulting into high rate of unemployable graduates and poverty-stricken population in the economy. The study found that there is a positive and significant relationship between government expenditure on education and economic growth. Similarly, it was found that there is a positive and significant relationship between oil revenue and economic growth. The study also found that allocation to education and health in Nigeria fall below 18% for past decades which is quite low and fall below the recommendations of the United Nations. Given the preceding discovery, these results imply that Nigerian government should implement the strategies enshrined in the NEEDS document with reports provided of progress made at each stage. The Government should increase not just the amount of expenditure made on the education and health sectors but also the percentage of its total expenditure accorded to these sectors. The ten percent bench mark recommended by the present national plan should be adopted. In particular, The Nigerian government should encourage private sector participation in the provision of private schools and hospitals. While these are already available, efforts should be made to make these services more affordable (at least cost) to the general public. Furthermore, Government should provide better infrastructural facilities for the existing schools and hospitals while establishing new educational and medical institutions to provide affordable quality education and health care for the populace. Keywords: Human capital, development, GDP, economic growth and government. 1 1. INTRODUCTION Without significant investments in human capital, no nation has achieved sustained economic development. A significant portion of this literature has stressed the complementary nature of human and physical capital, pointing out the ways in which imbalances in these two stocks, along with externalities related to human capital, can impact Nigeria's economic growth. Those with advanced degrees, like scientists and technicians, seem to have an advantage when it comes to comprehending and incorporating new or preexisting concepts into production procedures. In reality, people are a nation's most valuable resource. For human development, an incentive system must make sense. In addition to frequently leading to increased rates of poverty and income inequality, a flawed incentive system can waste human resources. Utilizing the resources we already have wisely is insufficient; we also need to develop our human capital to add to the resources already in place. The rate of human capital has been recognized by economists to be a key perquisite for a country’s socio-economic and political transformation. Among the generally agreed casual factors responsible for the impressive performance of the newly industrializing countries is an impressive commitment to human capital development (Adedeji and Bamidele, 2003). This has been largely achieved through increased knowledge, skills and capabilities acquired through education and training by all the people of these countries. It has been stressed that the differences in the level of socio-economic development across nations is attributed not so much to natural resources and endowment and the stock of physical capital but to the quantity and quality of human resources. According to Oladeji and Adebayo (1996), human resources are a critical variable in the 2 growth process and worthy of development. They are not only means but, more importantly, the ends that must be served to achieve economic growth. This is underscored by Harbinson (1973) who opined that “human resources constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production, human beings are the active agents who accumulate capital, exploit natural resources, build social, economic and political organizations and carry forward national development. Clearly a country which is unable to develop the skills and knowledge of its people and to utilize them effectively in the national economy will be unable to develop anything else”. Since gaining independence in 1960, achieving stability, material prosperity, peace, and social progress has been Nigeria's primary goal. Internal issues have, however, made this more difficult. These include inadequate human development, antiquated farming methods, shoddy infrastructure, uninspired industrial sector growth, lax policies and regulations, unfavorable environmental conditions, and resource mismanagement and misuse. The nation experimented with two development philosophies in order to diversify the economy and realize its potential: public sector-driven growth, which assumed the “commanding heights” of the economy, and private sector-driven growth, which saw the private sector act as the “engine house” of the economy. the economy's initial low degree of private sector dominance, which was bolstered by the sector's growth (UNDP, 2009). It is important to note that since the transition to civilian rule in 1999, growth performance has improved significantly. The last seven years witnessed an average growth rate of about 6 percent (UNDP, 2009:5 CBN, 2008). However, economic growth 3 has not resulted in appreciable decline in unemployment and poverty prevalence and hence human capital development has remained during pressure. Nigeria's current goal is to rank among the richest nations in the world by 2020. Ensuring that competent labor is available for the many social, political, institutional, technological, and economic endeavors that propel the process of growth, development, and industrialization is one of the prerequisites for making this a reality. Nigeria's human resource development needs to be strengthened and stabilized in accordance with the NEEDS program of 2004 and the current Vision 20: 2020 development program agenda. This will help to accelerate economic activities and set off higher productivity, income, and economic growth and development. The nation’s aspiration to be in the league of 20 leading economies in the world by year 2020 emerged on the realization that the endowment of Nigeria in material and human resources places her in good position to achieve this greatness. But the Human Development Report of UNDP (2008) shows that Nigeria is at the low level of human development compared to countries in emerging economies. This is Worrisome and poses a threat to 20:2020 agenda. Education, as a measure for quality, availability and human resource quality is the sole method which can be used to analyses the impact of human resource on economic growth (Benhabib and Apiegel, 1994). Therefore, education and training are the most relevant factors in human resource development. Economist often use the term human capital for education, health and other human capabilities that can enhance productivity (Todaro and Smith, 2003). Thus, quality of human resources refers to the state of education, health and other human capabilities that can raise productivity when increased. Studies in the United States of America have 4 shown that high school and college education lead to improvement in earnings even after taking into consideration the direct costs (study fees, loss of purchasing books and other materials) and indirect costs (foregone income from being employed) during schooling. Studies in several other countries with different cultural and economic system also showed the same outcome that income obtained by educated people with always be above the average income level. Investment in people and their growth as creative and productive resources is therefore linked to human capital development. There is a claim that investing Naira in education increases national income more than investing Naira in capital goods such as dams, roads, and facilities. Investing and improvement brought about by better men accounts for a large portion of our industrial growth rather than increased capital investment. Technological knowledge and skills formed the country’s immaterial equipment or intangible assets without which physical capital could not be utilized productively. (Yerima, 2005) The idea of investment in human capital is of recent origin. Jningan (2005) in Oluwatoyin (2011) reveals that in the process of economic growth, it is usual to attach more relevance to the accumulation of physical capital than human capital. The new endogenous growth theories are thus important in the introduction of the active role of human Capital in the growth of economies. Human Capital is the term economist frequently use for education, health and other human abilities that can raise productivity when increased. Health and education are two closely related human capital components that work together to make individual more productive (Todaro and Smith 2003) as cited by (Oluwatoyin 2011). 5  The process of obtaining and growing the population in Nigeria with the knowledge, training, and experience necessary for political and economic development is underdeveloped. It is challenging to determine the total number of men needed, as well as the stage at which human capital is most needed, the rate at which human capital is growing, the kind of education that should be imported, how much of it, and when, as well as how to calculate the economic returns on investments in health and education. It has been also acknowledged that no significant economic growth by any country can be achieved without adequate development of her human capital. In the past, most of Nigeria’s planning was focused on the accumulation of physical capital for rapid growth and development without recognition of the vital role played by human capital in the process of development. The human development index provides three components for measuring human development namely: education and income, health, living a long and healthy life (measured by life expectancy). These components of human development are very low in Nigeria. Public expenditure on social service namely: education and capacity building and health care that are vital to human capital development is generally low in Nigeria. Nigeria’s budgetary allocation to education is still inadequate from the 26% recommendation of United Nation Education, Scientific and Cultural Organization (UNESCO) the result of the inadequate spending on education is the continued decline in educational opportunities and standard in Nigeria as well as graduates that are not prepared for job creation giving rise to increasing unemployment in the country. On the other hand, the health sector in Nigeria is inadequately equipped with modern facilities. 6  The budgetary allocation to health as a proportion of the national budget was inconsistent between 2.70% and 7.00% from 1999 to 2010 (Federal ministry of Finance, 2010). The major objective of this study is to examine the impact of human capital development as a key to Nigeria economic growth. Other secondary objectives of this study are: a. To examine the impact of human capital development on economic growth in Nigeria. b. To examine the impact of government educational expenditure on economic growth in Nigeria. c. To examine the impact of government health expenditure on economic growth in Nigeria. 2. LITERATURE REVIEW Human capital is the stock of information or awareness gained through experience, habits, social and personality attributes, creativity included in the ability to perform labor with the aim of producing economic value. There are many theories explaining the link between investment in human capital development to education and the impact of human capital in economic growth, and innovation has often been cited as a rational behind government subsidies for education, and job skills training (Halidu 2016). Ogujiuba (2013) is of the view that human capital development is important to the socio-economic development of a nation which consist education, health, labor, employment and women affairs. He emphasized that investment in human capital development is therefore relevant as it is aimed at ensuring that the nations human 7 resource endowment is intelligent and well informed, skilled, productive and healthy to provide the favorable exploitation and utilization of other resources to give rise to growth and development. Evaluating the assertion of Ogujiuba (2013) one may likely say no country can realize economic growth and development without having skilled labor that can optimally explain and utilize the available resources of the nation. The various economic theories that relate the development of human capital to economic growth have been thoroughly examined in the field of economic literature. The main schools of thought that can be linked to these theories are Schumpeterian, neoclassical, and Keynesian. Solow (1957) and Swan (1956) are among those who made early inquiry into human capital and economic growth under neoclassic growth theory. The early neoclassical theory has been found to lay much emphasis on exogenous demographic factors that affect the growth rate of nations. Such factors which include population growth rate, labor force and the rate of technological change are often seen as the determination of long-term economic growth through the accumulation of factor inputs which includes physical, capital and labor (Agiomirgianakis et al 2002; Hiro and Huggins (2004). Neoclassical theory holds that capital accumulation increases an economy’s growth in the medium term but the steady state growth is constrained by the rate of growth of the labor force. The theory also shows a significant contribution from technical progress which it sees as an exogenous variable, and this technical progress remains a major driving force in economic growth and development. The discourse on role of technology experience has higher returns to education more than accompanying factors which include technical progress. 8  An economy that invests more resources in human capital formation invariably gathers increased dynamic indigenous technology (Amir, 2002). The neoclassical model follows an aggregate production function, a constant return to scale in labor and reproducible capital as represented in the functional form (see equation 2.1) below: 𝛾 = 𝐹(𝐾, 𝐿) … … … … … … … … … … … … … … … … … … … … … … … … (2.0) Where 𝛾 is output (or income), K is the stock of capital while L is the labour force. The function explains the output, 𝛾, under a given state of knowledge with a given a given range of available techniques and a given array of different capital, immediate goods and consumption goods. With constant returns to scale, labour productivity measured by output per worker (i.e. capital measure intensity, K = K/L). under the assumption of constant returns to scale, the relationship each unit of labour has with capital in population does not change with the quantity of capital or labor in the economy. A crucial property of the aggregate production function is that there are diminishing returns on the accumulation of capital. In other words, each additional unit of capital used by a worker produces a decreasing amount of output. A form called the Cobb- Douglas function usually express the relationship 𝛾 = 𝐿 ∝ 𝐾 ∝ 0 <∝> 1 … … … … … … … … … … … … … … … … . (2.1) Alternatively, the per worker production function can be written as: 𝛾 = 𝑓, (𝐾) = 𝐾 ∝ … … … … … … … … … … … … … … … … … … … … … (2.2) Implying that labor productivity can increase given that if that capital deepens. A relevant aspect of neoclassical model lies in decreasing returns on capital in which output 9 per worker is deemed not to increase indefinitely let individuals save a constant function say 5, of their total income 𝑦; let the constant fraction, 𝜎 of the capital stock be gone each year due to depreciation. Suppose the population growth is n, and population growth causes capital stock per worker, k, to fall at an annual rate, nk; the neoclassical model holds that net rate of increase in k is as represented in the equation (2.3) below: 𝑑𝑘 = 𝑠𝑓(𝑘) − (𝑛 + 𝜎)𝑘 = 𝑠𝐾 ∝ − (𝑛 + 𝜎) … … … … … … … … … … . (2.3) 𝑑𝑡 The neoclassical model states that while the decline in the capital stock per worker as a result of depreciation and population growth is proportional to the capital growth saving is constrained by decreasing returns on capital in production such that when the marginal product of capital per worker falls to a sufficiently low level, gross investment will be just sufficient to maintain the existing stock of capital. Therefore, the capital stock per worker will in the long term, converge asymptotically to K* as defined in the equation (2.4) below :𝑠𝐾 ∝ − (𝑛 + 𝜎)𝐾 ∗ = 0 … … … … … … … … … … … … … … … … … … … (2.4) This is the neoclassical steady state equilibrium where output and capital stock will both continue to grow though only at the rate of population growth. As a result, the neoclassical model is modified by introducing a productivity (or technology) parameter, A, in the aggregate function; reflecting the current state of technological know-how. Hence, 𝛾 = 𝑓(𝐴, 𝐾, 𝐿) … … … … … … … … … … … … … … … … … … … … … … . (2.5) 10 Supposing productivity increases steadily over time at a constant growth rate, g, as in equation (2.6) 𝛾 = 𝐴 egt𝐾 ∝ 𝐿 ∝ … … … … … … … … … (2.6) The above equation that increases in income level are determined by productivity growth, g, and the growth of capital per worker. Thus, even if the capital stock and labor force grow at the same rate, output per worker will increase given that rate of technical progress exceeds zero. The endogenous growth models have also been widely discussed as another area in economics linking economic growth to human capital. Paul Romer and Robert, Lucas are credited for popularizing the endogenous growth theory models in the mid-1980s. the works of the duo identify a number of factors that determine the growth rate of an economy which include increasing returns to scale, innovation, openness to trade, international research and development and of course, human capital formation. A major area of departure from neoclassical Solo-Swan model is the fact that the endogenous growth models treat technical progress as an exogenous factor while endogenous growth models take into consideration the innovation and technology diffusion. Lucas (1988) particularly states investment in human capital and constant returns can be avoided (Agiomirgiakis, et al, 2002), Hiro and Huggins 2004; Amir, 2012). However, in a latter growth model, the new growth theory, Lucas (1990) incorporates human as a factor of production while Romer (1990) incorporate human capital as a major source of technical progress hence, economic growth. 11  Though the endogenous growth models are credited to Paul Romer and Robert Lucas, endogenous growth model take a theoretical root in Frankel’s (1962) AK model where each firm, j, in the economy has a production function specified as: 𝛾 = 𝐴̅𝐾 ∝ 𝐿 ∝ … … … … … … … … . (2.7) Where, Kj and Lj are the firms over employment of capital and labor. Then function is extended to reflect a similar scenario, the entire economy in assumption that all firms face the same technology and the same factor prices, and will hire factors the same proportion as stated in equation (2.8) below: 𝛾 = 𝐴𝐾 ∝ 𝐿 ∝ … … … … … … … … … … … … … … … … . (2.8) The theoretical framework for this research will center on human capital theory. In the Wealth of Nations (1776) Adam Smith laid the foundation of science of human capital. Human capital theory agrees that schooling and training is what constitutes investment in skills and competences. The human capital theory shows how education improves worker level of cognitive abilities, technical knowhow which increase productivity. The theory asserts of that people invest with the aim of increasing their stocks human and intellectual capacities. The human capital theories argued further that expenditure in education is regarded as productive capital investment which they laid more emphasis than the physical capital investment. Bakare (2006); Simon (2011); Omojimite (2011); Atoyebi et al (2013) and Ogujiuba (2013) believed the theory and highlighting the relevance of education and training as the key for getting involved in the new global competitive economy. 12  Therefore, for Nigeria to occupy a respected position in the comity of Nations, her requirement of manpower in all levels of health and education must be well trained and equipped with required knowledge to remain undamaged or unaffected by the technological and scientific obstacles of global competitive economy so as to accelerate sustainable growth and national development (Halidu, 2016). Dauda (2010) made use of an adopted endogenous growth developed by Mankiw, Romer, and Weil (1992) in the study of human capital and economic growth relationship in Nigeria. However, the study did not include government spending as one of the human capital variables used in the model. The general lesson that emerged from the study is that government policy and implementation capacity is important, especially for determination the provision of schools and equity of access. Although private schools spring up under many circumstances and make an important contribution, equitable access to quality education depends crucially upon good government policy and implementation. Most studies on the education/heath economic outcomes nexus, both at the micro and macro levels, have generally examined two types of education/health indicators. According to Jafaroy, and Gunnarson (2008) quoting Verhoeven et al (2007), performance indicators are divided into desired outcome and intermediate output indicators. Desired outcomes correspond to the underlying objectives sought by policy makers. Intermediate outputs are thought to be related to desired outcomes but can be more closely associated with current spending. For health care, the intermediate output indicators are the destiny of physicians, pharmacists and health care personnel, the number of hospital beds, and the number of immunization vaccines. 13  The key outcome variables include infant, child and maternal mortality rates; the standardized death rate from all causes per 1,000 people as defined by the world health organization (WHO); incidence of tuberculosis and average life expectancy (as defined by WHO). For education, the key intermediate output indicators are primary school pupil/teacher ratio, enrolment rate, rates of progression to secondary education and graduation. The main outcome indicator is the average score on an international standardized test (programme for international student Assessment, 2006) in mathematics (secondary) education. It must be noted at this point that the intermediate output indicators are highly influenced by government policies in developing countries through fiscal budgetary expenditure. In explaining the performance of health and education sectors in some selected countries, United Nations Development Programme (2008) admitted that in the quarter of the century, many countries made remarkable advances in education and health. For instance, all 80 countries for which data were available for both 1980 and 2006 have registered progress in education. For most, there have been fairly stable progress over time, although, there was a notable handful of countries which had setbacks during this period. For instance, there were five countries (out of 110 with data) for which education attainment levels were no better than what they were in 1990: Armenia, the Maldives, the federation of Russia, Tajikistan, and Trinidad and Tobago. The picture of health was rather worse. There were about 30 countries (out of 180 with data) for which life expectancy were no better today than what they were no better today than what they were in 1990. Most of these countries are in sub-Sahara Africa, but many transition countries in Eastern 14 and Central Europe were also in this group as well as Jamaica, Trinidad and Tobago in the Caribbean. UNR (1996) expressed categorically that education is fundamental in enhancing the quality of life and ensuring social and economic progress. This is because education tends to play a key rate in the ability of a developing country to absorb modern technology and to develop the capacity for self-sustaining growth and development. Lee (1989) is of the view that the main problem that is associated with the belief that education is good for economic growth could be tied with how to maintain an equilibrium position. This equilibrium is in terms of balancing a scenario where there will be no shortage of the supply of educated people because such shortage may mar or limit growth while on the other hand excessive supply of it might create unemployment and thus limiting economic growth. Griffin and McKinley (1992) opined that human capital development is targeted at growth and development strategy intended to improve the wellbeing of people within a short time possible. To them, the implementation of strategy will require a change in the composition of government spending and that the percentage of the budget earmarked for activities which do not contribute to development should be reduced to the minimal that is, activities such as military defense among others. On the contrary, Ayara (2003) provided evidence on the linkage between the paradox of education and economic growth in Nigeria using the standard growth accounting model. The results should that education has not had the expected positive growth impact on economic growth. 15  Put together, the finding the array of literatures surveyed supports the idea that education matters for growth and development in both developed and developing countries. Also, literature have proved overtime that there is the possibility that the relationship that existed in the theory may not be replicated in real economy activities given the presence of some factors which may not be clearly identified in the theory Ajisa et al (2006). 3. METHODOLOGY This study used secondary data for all variables to be employed. Annual time series data from 1986 to 2017 will also be employed. Data on variables such as Gross Domestic Product (GDP), Government Expenditure on Health, and Government Expenditure on Education as well as Oil Revenue will be sourced from Central Bank of Nigeria (CBN) and Statistical Bulletins, National Bureau of Statistics (NBS), and others. In line with the general objective of this study, the researcher employed ordinary least squares technique due to its scintillating features and reliability in measuring of linear relationship between variables (BLUE). In an attempt to determine the impact of human capital development on economic growth in Nigeria, it is necessary to develop a model to justify the correlation that exists between the variables. In this regard, a multiple regression model had been developed to determine the impact of human capital development on economic growth. The model for this study will be theoretically stated as: Gross Domestic Product (GDP) is a function of 16 Government’s Expenditure on Education (GEE), Government’s Expenditure on Health (GEH) as well as Oil Revenue (OILRV). Thus: GDP = f (GEE, GEH, OILRV) --------------------------------------------------(3.1). Gross Domestic Product (GDP) is going to be chosen as a proxy for Economic Growth because it reveals the overall contribution of each sector of the economy. The variables will examine in the logarithm forms to help in achieving linearity. Equation (3.1) above is therefore re-specified as follows: Log GDP = βo + logβ1GEE + logβ2GEH + logβ3OILRV + 𝜇 -----------------(3.2). Where: βo= Intercept of equation Log = natural logarithm GEE = Government’s expenditure on Education. GEH = Government’s expenditure on Health. OILRV = Oil Revenue. 𝜇 =Stochastic error term. The economic apriorism criteria refer to the sign and size of the parameters and the economic relationship between the variables. The apriorism expression of this multiple 17  regression model is that β 1>0; β2>0; β3>0. A positive sign is expected from the coefficient of the relationship between GDP and GEE, GEH and OILRV. Table 4.1.1: Unit Root Test at level Variables Critical Critical Critical Lags Order t-statistics Prob. values at values at values at of 1% 5% 10% integration GDP -3.661661 -2.960411 -2.619160 7 I (0) 3.397432 1.0000 GEE -284580 -3.562882 -3.215267 7 I (0) -1.919542 0.6204 GEH -4.284580 -3.562882 -3.215267 7 I (0) -0.699875 0.9632 OILRV -4.284580 -3.562882 -3.215267 7 I (0) -2.835461 0.1961 Source: Authors Computation: E-views7 The table 4.1.1. shows the unit root test. The result of the stationarity test conducted reveals that all the variables under investigation are found to be non-stationary at level I (0) and hence we further conducted stationarity test at first difference I (1) as shown below in table 4.1.2. Table 4.1.2: Unit Root Test at first difference Variables Critical Critical Critical Lags Order t-statistics Prob. Values Values Values Of at 1% at 5% at 10% Integration GDP -4.296729 -3.568379 -3.218382 7 I (1) -5.441094 0.0006 18 GEE -4.323979 -3.580623 -3.22533 7 I (1) -4.820326 0.0032 GEH -4.416345 -3.622033 -3.248592 7 I (1) -4.000421 0.0236 OILRV -4.296729 -3.568379 -3.218382 7 I (1) -6.731818 0.0000 Source: Authors Computation: E-views7(see appendix A-I) The table 4.1.2 above shows the unit root test. The result of the stationarity test conducted reveals that all the variables under investigation are found to be stationary at first difference I (1). Hence this provided the basis for conducting cointegration test to determine the long-term relationship between the variables under investigation. Table 4.1.3: Error Correction Model (ECM) Variable Coefficient Std. Error t-Statistic Prob. C 354.4523 862.5759 0.410923 0.6857 D (GDP (-1)) 1.295714 0.282158 4.592160 0.0002 D (GDP (-2)) 0.426786 0.293344 1.454899 0.1620 D (GEE (-1)) -138.3523 51.02979 -2.711206 0.0139 D (GEE (-2)) -111.4818 42.25460 -2.638335 0.0162 D (GEH (-1)) -68.56009 68.87071 -0.995490 0.3320 D (GEH (-2)) -45.21931 38.18944 -1.184079 0.2510 19  D (OILRV (-1)) -0.417971 1.188296 -0.351740 0.7289 D (OILRV (-2)) 4.175942 1.221830 3.417776 0.0029 ECM (-1) -0.687694 0.288239 -2.385847 0.0276 R-squared 0.790558 Mean dependent var 3912.012 Adjusted R-squared 0.691349 S.D. dependent var 6068.304 S.E. of regression 3371.328 Akaike info criterion 19.35080 Sum squared resid 2.16E+08 Schwarz criterion 19.82228 Log likelihood -270.5866 Hannan-Quinn criterion. 19.49846 F-statistic 7.968604 Durbin-Watson stat 1.305134 Prob(F-statistic) 0.000081 Source: Author’s Computation: E-views7 The results of the error correction model estimation in table 4.1.3 shows that all parameter estimates are appropriately signed and inconformity with the apriorism expectations. The estimated coefficient of the error correction term (-0.687694) is significantly different from zero at 5% level and with the appropriate negative sign. This suggests the validity of long run equilibrium is at an adjustment speed of 69 per cent speed of adjustment of the system (economy) in a year to its previous equilibrium. Table 4.1.4: Regression Result for the Objectives of the Study 20  Variable Coefficient Std. Error t-Statistic Prob. C 4.400669 0.896838 4.906870 0.0000 LOG(GEE) 0.166987 0.298423 0.559564 0.5802 LOG(GEH) 0.194367 0.327745 0.593044 0.0279 LOG(OILRV) 0.511068 0.166778 3.064365 0.0048 R-squared 0.952744 Mean dependent var 8.802891 Adjusted R-squared 0.947680 S.D. dependent var 2.034650 S.E. of regression 0.465395 Akaike info criterion 1.424608 Sum squared resid 6.064588 Schwarz criterion 1.607825 Log likelihood -18.79372 Hannan-Quinn criterion. 1.485339 F-statistic 188.1709 Durbin-Watson stat 1.975723 Prob(F-statistic) 0.000000 Source: Author’s Computation-Eviews7 The result presented above was obtained from the regression analysis and the result shows that all the variables conform to a-priori expectation and the intercept is positively related to GDP (Economic Growth) and is significant indicating that it is not possible to have economic growth without human capital development. 21  When all other explanatory variables are held constant, the economic growth will be declining at the rate of 4.400669 percent, indicating that if the government does not invest in human capital development which is determinant of economic growth, the Gross Domestic Product of Nigeria will decline at the rate of 4.400669 percent annually. GEE (Government Expenditure on Education) which is one of the important variables in the model shows a positive and significant relationship to economic growth. The result shows that a 1 percent increase in the government expenditure on education will lead to about 0.17 percent rise in economic growth in the economy. This result shows that government expenditure on education is a significant factor that led to increase in economic growth. The result however is not surprising from the a-priori expectation and theoretical framework. Government Expenditure on Health (GEH) is also an important variable in the model, this variable shows a positive relationship with GDP and it is significant at 5% with probability value of 0.0279, from the result it shows that a 1 percent increase in government expenditure on health a component of human capital development will lead to 0.2 per cent rise in growth which has a significant impact on the economy. This explain that when government spends in the manpower and medical facilities in the health sector it will in a way improve the technical knowhow of medical personnel available in Nigeria which will also reduce what Nigerians spend abroad on medical bills. Oil Revenue (OILRV) is also an important variable in the model, this variable shows a positive and significant relationship to economic growth in Nigeria. The result shows that a 1per cent increase in the oil revenue will lead to about 0.5 per cent rise in 22  economic growth of the economy. From the t-statistics, the result shows 3.064365 as a value with probability value being 0. 0048.This result shows that oil revenue is a significant factor (at 5%) that led to increase in economic growth and has contributed greatly to the major source of revenue available to the government. The R-square is 0.95 showing that explanatory variables explain 95% of changes in dependent variable. It remained strong even after adjusting for the degrees of freedom 94% (Adjusted R-squared). This shows that in Nigeria, the variables chosen are strong in explaining economic growth. The Durbin-Watson statistics which is approximately 2 falls within the acceptable range in applied research of no autocorrelation. 4. CONCLUSION This study has provided evidence on the impact of human capital development on economic growth in Nigeria between 1986-2017 using OLS the best linear unbiased estimator (BLUE). The researcher was inspired and motivated by the conquest for knowledge and the need to draw policy framework that can be adopted to better the Nigerian economy. The result of the co-integration tests revealed the presence of co- integration among the variables incorporated in the model. Following the establishment of co-integration among the listed variables, the need for the estimation of Error Correction Model (ECM) to reveal the short run adjustments of the co-integrated variables became necessary. Therefore, this test was conducted and the result revealed that Error Correction Term carries a negative sign and statistically significant. 23  The study found that allocation to education and health in Nigeria fall below 18% for past decades (CBN, 2012) which is quite low and fall below the recommendations of the United Nations. Nevertheless, it is found that allocation to education and health does not only contribute positively to economic growth in Nigeria, but the impact is strong and satisfactorily significantly which explains 95% variation in Nigerian economic growth. When all other explanatory variables are held constant, the economic growth will be declining at the rate of 4.400669 percent, indicating that if government does not invest in human capital development which is a determinant of economic growth, the Gross Domestic Product of Nigeria will decline at the rate of 4.400669 percent annually. The study further found that there is a positive and significant relationship between government expenditure on education and economic growth. The result shows that a 1 percent increase in the government expenditure on education will lead to about 0.17 percent rise in economic growth in the economy and hence government expenditure on education has significant impact on economic growth in Nigeria. Government Expenditure on Health showed a positive relationship with GDP. A 1 percent increase in government expenditure on health will lead to 0.2 percent rise in growth which is a significant impact on economic growth. Oil Revenue (OILRV) is also an important variable in the model, this variable shows a positive and significant relationship to economic growth in Nigeria. The study also found that there is a positive and significant relationship between oil revenue and economic growth. The result shows that a 1per cent increase in the oil revenue will lead to about 0.5 per cent rise in economic growth. From the t-statistics, the result shows 3.064365 as a value with probability value being 0. 0048.This result shows 24 that oil revenue is a significant factor (at 5%) level of significance that led to increase in economic growth and has contributed greatly to the major source of revenue available to the government. In Nigeria, the process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for economic and political development is underdeveloped. There is difficulty in assessing the total stock of men required, coupled with the stage when human capital is needed most, the growth rate of human capital, the type of education to be imported and to what extend and what time as well as how to measure the returns from health and educational investment in the economy. The foregoing shows that human capital development in Nigeria is severely underdeveloped resulting into high rate of unemployable graduates and poverty-stricken population in the economy. 5. RECOMMENDATION Based on the conclusion that human capital development stimulates economic growth, and the finding that Nigeria is yet to fully harness the benefit from it in terms of enhanced economic growth. The study recommends the following tendencies of human capital development in Nigeria.  The strategies planned by government in the education and the health sectors as enshrined in the NEEDS document should be carried out fully with reports provided of progress made at each stage.  The Government should increase not just the amount of expenditure made on the education and health sectors but also the percentage of its total expenditure accorded 25  to these sectors. The ten percent bench mark recommended by the present national plan should be adopted.  The private sector participation should be encouraged in the provision of private schools and hospitals. While these are already available, efforts should be made to make these services more affordable (at least cost) to the general public.  Teachers/lecturers and doctors should be paid higher wages than what they presently earn so as to curb the imminent brain drain problem of the country.  Government should provide better infrastructural facilities for the existing schools and hospitals while establishing new educational and medical institutions to provide affordable quality education and health care for the populace.  The free basic education (UBE) and health care programmes established by the governments at various levels should be improved upon and sustained.  Government should provide enabling environment of macro-economic stability to encourage investment in human capital development by both the private and public sector.  There should be capacity building for both the private and public sectors to enhance productivity in the economy.  Government should fulfill agreements reached with the organized various unions of tertiary institutions to avoid incessant closure of tertiary institutions due to strikes.  Government should encourage public educational institutions to develop resource mobilization strategies so as to generate revenue by themselves.  The anti-corruption drive by the present administration should be sustained for better performance of the economy via human capital development. 26 REFERENCES Adamu, Patricia A. (2003): “The impact of Human Capital on Economic Growth in Nigeria: Error Correction Approach” Paper Presented at the 2002 Annual Conference of the Nigerian Economic Society, Nigeria. Adedeji, S.O and R.O Bamidele (2003) Economic Impact of Tertiary Education on Human Capital Development in Nigeria: In Human Resource Development in Africa, selected papers for 2002 Annual Conference, Nigerian Economic Society, Ibadan, pp 499 – 522. Atoyebi, K.O, Olalaye, S.O, Ishola, A.S. Adekunjo, F.O and Kadiri K.I (2013). Human Capital and economic growth in Nigeria. International Journal of Humanities and Social Services invention Vol.2, Issue 2 Pp 58-69. Babatunde and Afolabi (2005) Impact of Human Capital Development an Economic Growth in Nigeria (1970-2003). www.paperpublications.org/download Bakare A.S(2006) The Growth implication of Human Capital investment in Nigeria: Central Bank of Nigeria (2008) Statistical Bulletin, CBN, Abuja Fadiya B.B. (2010) Determinants of educational Outcomes in Nigeria (1975- 2008).www.researchgate.net/publication/2 G. Agiomirginakis, D. Asteriou, and V. Menastiriotis, Human Capital Development and Economic Growth Revisited: A Dynamic Paned Data Study, International Advances in Economic Research (IAER), 8(3) 2002. Igun, S.E. (2006) ‘Human Capital for Nigerian Libraries in the 21 st century; library philosophy and practice (e-journal) val.8, No.2. Adebiyi Isola, W.A and Alani, R.A (2012). Human Capital Development and Economic Growth: Empirical Evidence from Nigeria. Asian Economic and Financial Review, 2(7), 813-827. Jhingan, M.L (2005). The Economics of Development and Planning (Thirty-Eight Edition), India: Vrinda Publication (p)ltd Jones, Gareth and Joel Schneider (2005). Intelligence, Human Capital and Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach. This version: June 2005, first Published in Journal of Economic Growth, March 2006. Laucanson O. and Marimathy, L. (2009) Human Capital Investment and Economic Development in Nigeria: The Role of Education and Healthy, University of Lagos, Nigeria, Researcher paper. 27 Lucas, R. E (1988). “On the Mechanics of Economic Development” Journal of Monetary Economics 22. M.A. Adawo (2006), Has Education Contributed to the Economic Growth of Nigeria? Journal of Economics and international finance 3(1), 2010,46-58. M.Amir, M. Bilal and S. Muhammad, Impact of Human Capital on Economic Growth with Emphasis on Intermediary Role of Technology: Time Series Evidence from Pakistan. African Journal of Business Management Vol.6 (1), 2011, 280-285. National Planning Commission (2004). National Economic Empowerment and Development Strategy NEEDS. Ndulu (2010) Government Expenditure on Human Capital Development in Nigeria. www.reserachgate.et/publication/2/ Newsland, C and M.J. Segundo (1996). ‘Human Capital and other development of the price life cycle of a spare: Peru and La Plata in the Eighteenth Century; The Journal of economic History, Val56 (3), PP.694-701. Ogujiuba K. (2013). The impact of human Capital formation on economic growth in Nigeria. Journal of Economics. Vol. 4, N0.2. Okoje, C.E.E (1995). Human Capital Formation for Productivity Growth in Nigeria. Nigerian Economic and Financial Review, June, 44 – 55. Oladeji, S.I and A. Adebayo (1996) The Scope of Human Resource Development Under the Adjustment Programme in Nigeria. Beyond Adjust: Management of the Nigerian Economy. Nigerian Economic Society Annual Conference Ibadan: NES pp 441 – 460. Oluwatobi S.O and Ogunriola I.O (2011) Government Expenditure on Human Capital Development www.researchgate.net/publication/27 Omojimite, B.V. (2011) Building Human Capital for sustainable economic development in Nigeria. Journal of Sustainable Development. Vol.4, N0.4. Romer P.M. (1994) “The Origins of Endogenous Growth”, The Journal of Economic Perspectives, Vol. 8, No. 1, pp. 3 – 22. Romer, P.M. (1990). Endogenous Technological Change Journal of Political Economy, 98(5), 71 – 102. S.A Owolabi, and A.T. Okwu, (2010). A quantitative analysis of the role of Human Resources Development in Economic Growth in Nigeria European, Journal of Economic, Finance and Administrative Sciences (JEFAS), Issue 27. 28 Sankay, O.J, Ismail, and Shaari, A.H (2010). The impact of human Capital Development on the Economic Growth of Nigeria. Presiding Perkem V, Jilid, 1, 63-72. Schuftz, T. (1961) ‘Investment in Human Capital,’ American Economic Review (March), Vol 45, N0.57. Simon – Oke O.O(2012). Human Capital investment and industrial productivity in Nigeria. International Journal of Humanities and Social Sciences Vol.2, N0.16. Solow R. (1996), “A Contribution to the Theory of Economic Growth”. Quarterly Journal of Economics, Vol. 70, No.1 pp. 65 – 94. Steven, N (2018) “What is the Relationship between human capital and Economic Growth?” The Guardian Newspaper, January 15th and February 19th 2008. Todaro M.P and S.C Smith (2003). Economic (Eight Edition), India: Person Education (Singapore) Pte ltd. WHO (1998) Report on Health in Nigeria. WHO (2001) Report on Health in Nigeria Woodhall, M. (2001). Human Capital: educational aspects, International Encyclopedia of the Social and behavioral Sciences. World Bank (2010) Report on education in Nigeria. www.resercachgate.net/publication/25... COPYRIGHTS Copyright for this article is retained by the author(s), with first publication rights granted to the journal. This is an open-access article distributed under the terms and conditions of the writer. 29