HUMAN
CAPITAL DEVELOPMENT AND NIGERIAN ECONOMIC GROWTH BETWEEN THE YEARS 1981-2014.
CHAPTER ONE
INTRODUCTION
Background of the Study
In history,
no country has continual economic development without substantial investment in
human capital. The effect of government expenditure spending on human capital
development is still and unreserved issue both theoretically and empirically.
The description of a nation’s wealth
has widened to accommodate not only physical capital but also human capital as
a independent factor of production required to achieve high and sustained
labour productivity rates. Development country across the globe face a myroid
myriad of problems raging from poor government, poor programme implementation
to corruption just to mention a few.
The consequential effect of this is
noticeable in rising poverty levels, good, insecurity, deplorable state of
infrastructural facilities and a general poor service delivery system.
Over the past decade, Nigeria
government has allocated large sums of money for spending on the social
sectors, yet the results on ground has been quite disappointing. Nigeria, the most populous country in sub-Sahara
Africa is blessed with enormous human material
resources.
Yet macro economic data on growth
poverty, and living standards during the last decode have been rather puzzling
on the one hand, Nigeria
appear to be experiencing strong economic growth averaging 7% annually, which
was particularly concentrated in the area of agriculture and trade.
On the other hand, the national per
capital poverty rate remained very high at more than 60% of the population with little evidence of recent
progress in poverty reduction . how could a country of the size and wealth of Nigeria have poverty rate much higher than the
surrounding country like Nigeria
and Benin Republic? (World Bank Report, 2014).
Also in 2010 World Bank (2011) tagged Nigeria as one
of the most poverty entrapped economics in the World with poor human welfare
status.
In 2010, out f 158.8 million Nigerian
53.8% constitute economic active group compared to an average annual increase
from 52.2% in 1980-1998 to 53.7% in 1996-2010. this indicate that Nigeria
has abundant and potential economic active youth to contribute reproductively
towards sustainable growth (Adeoye, Sangosanya and Atanda, 2012).
In current global market, companies
are composed by competitors, regardless of industry. To develop competitive
advantages it is important that firms truly leverage on the work force as
competitive weapon. A strategies for improving the firms output has become an
important focus.
Firms seek to optimize their work
force through comprehensive human capital development programmes not only to
achieve business goals but most important is for a long-term survival and
sustainability. To accomplish this undertaking, firms will need to invest
resources to ensure that employees have the knowledge, skills and competencies
they need to work effectively in a rapidly changing and complex environment. In
response to the changes, most firms have embraced the nation of human capital
as a good competitive advantage that will enhance higher performance. Human
capital development becomes a part of an overall effort to achieve
cost-effective on firm performance. Hence, firms need to understand human
capital that would enhance employee satisfaction and improve performance.
Although, there is a broad assumption that human capital has positive effect on
firm’s performance for human capital remains largely untested.
Government spending in Nigeria has
continued to rise due to the huge receipts from production and sales of crude
oil, and the increased demand for public utilities goods like roads,
communication, power, education and health. There is increasing need to provide
both internal and external security for the people and the nation. Available
statistics show that total government expenditure (capital and recurrent) and
its components have continued to rise in the last three decades for instance,
government total recurrent expenditure increase from N4,805.20 million in 1980 to N36,219.60
million in 1990 and further to N1,589,270.00
in 2007.
On the other hand government capital
expenditure rose from N10,163.40
million in 1980 to N24,048.60 million
in 1990. Capital expenditure stood at N239,450.90
million and N759,323.00 million in 2000
and 2007 respectively.
The various components of capital
expenditure have risen between 1980 and 2011. However, the rising government
expenditure may have not translated to
meaningful growth and development, as Nigeria ranks among the poorest
countries in the World. In addition, many Nigerians have continued to wallows
in object poverty, while more than fifty percent live on less than us $1 per
day.
Moreover, macroeconomic indicators
like balance of payments, impact obligations, inflation rate, exchange rate,
and national savings reveals that Nigeria has not fared well in the last the
decades.
Economic development theorists
generally agree that the quality of human resources has a significant impact on
economic development and growth. They opined that the quality and quantity of
labour determine production. Attention has been given to using health and
education as a measure for welfare indicators in addition to GDP per capital.
Education, good health and longevity are intrinsically valuable input for
productivity.
In conventional measures of productivity,
health and education contribution are measure essentially by the costs of
producing the outcomes i.e expenditure on schools and medical facilities. Such procedure
identifies inputs rather than outputs, health and education cannot be directly
purchased like material goods and service. Health and education are often
subsidized by the state.
In some countries, education is compulsory
for certain minimum length of time. Many countries, if not most health and
education services are produced by the public sector.
Government plays direct part in
providing public service that are directly linked to human welfare through its
numerous spending. The issue relating to effective and efficient public service
delivery are critical for Nigeria because it is a country where the public
sector control enormous wealth coming from oil revenues leading to public
spending levels in t tune of over 40% of GDP, yet there is very little to show
for this in terms of actual impact on poverty (CBN Report, 2010).
In the past, many of the Nigeria
government planning was centered on the accumulation of physical capital for
rapid growth and development without recognition of the important role played
by human capital in the development process.
Inadequate investment in both education
and health sector are clearly not only the cause of Africa’s
economic difficulties. However, the poor-health and education of workers is one
of the major factors contributing to her low income. Good health is important
facilitators of human capital accumulation since child malnutrition might lead
to cognitive deficiency.
An African adage says that a well
educated and well nourished population is a pre-requisite for a well
functioning democracy. Therefore, there are long term effects and benefit of educating
one generation on the welfare of their future children.
A healthy nation is a wealthy nation
there can be no significant economic growth in any country without adequate
human capital development. Although, the theoretical position on the subject are
quite diverse, the conventional wisdom is that a large government spending is a
source of economic instability or stagnation. A few studies reported positive
and significant relationship between government spending and human capital
development while several others found significantly negative or no
relationship between an increase in government spending and human capital
productivity. In view of this, there is a need to clarity the precise
relationship between various components of government expenditure spending on
human capital development and the growth of the Nigeria economy.
In addition, acknowledging this
relationship developing nations has in varying degrees attempted to stimulate
the accumulation of human capital through spending on health and education. Nigeria
is faced with a deplorable health condition due to some problems facing the
health sector. It has affected standard of living of people and as well reduced
the production level that is needed to improve the economic growth.
Furthermore, the lack of adequate data
has also contributed to the difficulty of detecting a relationship between
government expenditure and educational development. If aggregate analysis is to
be undertaken, complete data would be desirable. Even if complete longitudinal
data were available for each country, the issue of appropriateness and
equivalence of the indicators would still need to be addressed (Armer, 2005);
The issue of how best to measure human capital development and social
indicators has long been a concern of development research.
Health and education are two closely
related human capital components that work together to make the individual more
productive. One component can not be considered important than the others
(Lawanson, 2009 Health connotes the ability to lead a socially and economically
productive life (Anyawu etal, 1997).
A healthy populace will be highly
productive and the educated have the tendency to apply a degree of
sophistication in the production process. Similarly, health is fundamental to
economic growth and development and is one of the key determinants of economic
performance both at the micro levels. This derives from the fact that increases
individuals capabilities (Bloom and Canning 2003). Grossman (1972) has equally
demonstrated that health is a form of human capital. Schutti (1992) argued that
population quality is the decisive factor of production and emphasized the
merits of investing in education and health.
Meeting the commendable United Nation
health Millennium Development Goals (DGS) of a reduction by two-thirds in the
under-5 mortality and halting and beginning to reverse the spread of HIV/AIDs,
Malaria and other major disease by 2015 will be completely collusive for
sub-Sahara African countries like Nigeria if sufficient similarly, eradicating
illiteracy as one of the objectives of the (MDGS) will be a marriage if
adequate attention is not given to
educational expenditure by the federal government.
It is against this back dropt that
this paper examines the correlation between expenditure on education and health
services, and Economic Growth in Nigeria. Among other objectives,
the paper focuses on public expenditures on the education and health sector
during the period under review with a view to ascertaining the relative commitments
of the governments to these sectors. In addition, the study empirically
identified the various outcomes from expenditure on education and health
service and their correlation with economic growth.
Statement of the Problem
In Nigeria, the
rate of illiteracy is very high. Most of the worker’s are unskilled and they
make use of outdated capital equipment and methods of production. By
implication, their marginal productivity is extremely low and this leads to low
real income, low saving, low investment and consequently low rate of capital
formation.
It was indicated on the document that
adult literacy rate of at least 65% would be attained by 2008. Therefore, the
strategy aimed at empowering the citizenry to acquire the skills and knowledge
that would prepare them for the vast challenges overtime the following issues
relating to the concept have remained unresolved, uneven distribution of
skilled manpower, misemployment of human capital in Nigeria, poor reward system
retarding the acquisition and development of human capital.
Nigeria
is referred to as the giant of Africa. Despite
this title, it has not translated into a sustainable growth which can lead to
economic development. Though, the government tends to pay lip service to the
funding of educational sector as each state has its primary, secondary and
tertiary institution with a lot of federal government institution in virtually
all the states of Nigeria, the quota of the yearly budget devoted to education
and health sectors has developed series of question as these are substantially
not enough for adequate infrastructural development in then sectors.
A critical look into the share of
public expenditure on health in the national budget revealed that the share of
health is rather low. The percentage of public health expenditure.
According to World Health Organization
in 1995, 2000, 2005 and 2010 was 7.05%, 4.22%, 6.4% and 4.4% respectively. This
suggests that Nigerian health care situation still needs some improvement in
budget allocation mostly in the area of planning and execution (Bakare and
Sanmi 2011). The table below shows government commitment to the education
sector through the percentage of the sector’s expenditure in the total
government expenditure.
|
Year
|
Government
Capital Expenditure(EDU)
|
Government
Recurrent Expenditure (EDU)
|
Total
Government Expenditure (EDU)
|
|
1981
|
6.57
|
4.85
|
11.41
|
|
1982
|
6.42
|
5.51
|
11.92
|
|
1983
|
4.89
|
4.75
|
9.64
|
|
1984
|
4.10
|
5.83
|
9.93
|
|
1985
|
5.46
|
7.58
|
13.04
|
|
1986
|
8.53
|
7.70
|
16.22
|
|
1987
|
6.37
|
15.65
|
22.02
|
|
1988
|
8.34
|
19.41
|
27.75
|
|
1989
|
15.03
|
25.99
|
41.03
|
|
1990
|
24.05
|
36.22
|
60.27
|
|
1991
|
28.34
|
38.24
|
66.58
|
|
1992
|
39.76
|
53.03
|
92.80
|
|
1993
|
54.50
|
136.73
|
191.23
|
|
1994
|
70.92
|
89.97
|
160.89
|
|
1995
|
121.14
|
127.63
|
248.77
|
|
1996
|
212.93
|
124.49
|
337.22
|
|
1997
|
269.65
|
158.56
|
428.77
|
|
1998
|
309.02
|
178.10
|
487.11
|
|
1999
|
498.03
|
449.66
|
947.69
|
|
2000
|
239.45
|
461.60
|
701.06
|
|
2001
|
438.70
|
579.30
|
1,018.03
|
|
2002
|
321.38
|
696.80
|
1,018.16
|
|
2003
|
241.69
|
984.30
|
1,225.97
|
|
2004
|
351.30
|
1,032.70
|
1,426.20
|
|
2005
|
519.50
|
1,223.70
|
1,822.10
|
|
2006
|
552.39
|
1,290.20
|
1,938.00
|
|
2007
|
759.32
|
1,589.27
|
2,450.90
|
|
2008
|
960.89
|
2,117.36
|
3,240.82
|
|
2009
|
1,152.80
|
2,127.97
|
3,452.99
|
|
2010
|
883.87
|
3,109.38
|
4,194.58
|
|
2011
|
918.55
|
3,314.51
|
4,712.06
|
|
2012
|
874.83
|
3,325.16
|
4,605.39
|
|
2013
|
1,108.39
|
3,689.06
|
5,185.32
|
|
2014
|
783.12
|
3,417.58
|
4,578.06
|
The table presents the government
expenditure on the education sector overtime. It could be seen that government
recurrent expenditure in the sector was significantly higher than her capital
expenditure in all the year. This means that government did not invest
sufficiently in the sector given the fact that capital expenditure represents
real investment in the sector. The table shows that there was increase in total
education expenditure from 11.41 within the 1981 period to N7010.06 million in 2000. It decreased to N1,018.16 million in 2001 and by 2004, it was N1,426.20 million representing an increase of 39.1%. By 2010, total
expenditure increased to 4,194.58 million government expenditure on education
witnessed a high growth rate of 37% in 2002 amounting to N1018.16 million and this later dropped by 15% in 2003 after which
it increase to N4,578.06 million in
2014 except for 2009 when the value stood at N3,452.99
million.
Government expenditure on education
witnessed a high growth rate of 37% in
2002 amounting to N89,745.88 million an
d this later dropped by 15% in 2003
after which it increased to N204,469
million by 15% in 2011, except for 2009
when the value stood at N177,121.0
million (Ismail 1998).
Undoubtedly, one can say that
education has reached all state in one form or the other with privately owned
institutions cropping up each year graduate are being turned out in our
tertiary institutions (Colleges, Polytechnics and University). These youths are
sent to the labour market where the jobs available are relatively few in comparison
with job seekers.
Most of the indices of human welfare
which incorporate income on education and health show that Nigeria’s level
of human development is low compared with several other countries in the
African regions. Recent statistics from the World Health Organization (W.H.O)
regarding Nigeria’s health
status is disturbing the average life expectancy at 54 years is below the
global live births, twice as high as South Africa’s
300 per 1,000 and almost 10 time Egypt’s 66 per 1,000. beside only 3%
of HIV-positive mother’s receive anti-retroviral treatment. Between 2005 and
2012, Nigeria’s
Human Development Index value increased from 0.434 to 0.471, an average annual
increase of about 1.2% (Human Development Ratio, 2013).
However, health spending as a
proportion of the federal government expenditures shrank from an average of
3.5% in the 1970s to less than 2% in the 1980s and 1990s. (Federal Ministry of
Health, 2004) Nigeria
was ranked 187th among then 191 United Nations member states in 2000. That same
year Nigeria
spent 4 USD per capital health, below WHO’s Minimum bench mark of 14 USD per
capital for development countries (W.H.O, 200)
By 2002, total health expenditure was
in a disonal figure of 4.2% (Word Development Report, 2005). In 2012, total
health expenditure as percentage of GSP stood at 5.3% ranked 153 out of 187th countries
and tertiary. High profile individuals, especially the political class,
continue to fly abroad on regular basis for medical treatment, further widening
the inequality in a accessing health care services. Increase in government
expenditure and growth in per capital output in Nigeria do not speak for increase
in social welfare and health status in particular.
Of great is the deterioration in the
quality of education services at all levels, especially the higher education
levels where persons are trained to take up leadership roles in science,
technology, management and business. The state of infrastructural facilities in
schools and higher institutions is also nothing to write home about. For a
meaningful growth to take place, human capital must be developed and
efficiently utilized.
Strategy and priorities towards
sustained human capital and efficient investment in human capital and effective
manpower planning and utilization policies need to be put in place by the
government. This would in its way ultimately excite growth that will allow the
nation and the people to progress and achieve the required economic turn
around. It is in this wise that this study desires to examine the merits of
human capital development on economic growth in Nigeria.
Objectives of the Study
The broad objective of the study is to
examine Human Capital Development and Nigerian economic growth between the years
1981-2014.
The specific objectives of the study
are as follows:
o
To determine the relationship between Human Capital
Development and Economic Growth in Nigeria.
o
To examine the impact of Health Expenditure on
Nigeria Economic Growth.
o
To access the effect of Government Education Expenditure
on Nigeria Economic Growth between the years 1981-2014.
Research Questions
This
research study seeks addresses the following questions:
1.
What is the relationship between Human Capital
Development and Economic Growth of Nigeria?
2.
Does Health Expenditure have any significant
contribution to Nigerian Economic Growth via Human Capital Development in Nigeria?
3.
Does Education Expenditure as a means of Human
capital Development contribute to Nigerian Economic Growth?
Research Hypothesis
This study
will aim to test the following hypothesis:
H0: Health Expenditure has no
significant impact on Nigeria Economic Growth via Human Capital Development.
H0: Government Education
Expenditure has no significant Impact on Nigeria Economic growth.
Significance of the Study
When the
research objective of the study is achieved, the findings serve as a yardstick
for appraising the policy variations of the government on human capital
development.
The study will also be of great
importance to policy makers because it will help them see the impact of human
capital on national development and will help them make policy adjustment
concerning the education and health sector.
The study will also benefit the
education authorities and administrations as this will propel reforms and
transformation where necessary.
