HUMAN CAPITAL DEVELOPMENT AND NIGERIAN ECONOMIC GROWTH BETWEEN THE YEARS 1981-2014. - UNIPROJECTS

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HUMAN CAPITAL DEVELOPMENT AND NIGERIAN ECONOMIC GROWTH BETWEEN THE YEARS 1981-2014.



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.