CHAPTER ONE
INTRODUCTION

1.1       Background to the Study

The role of human capital in economic growth cannot be overemphasized. The development of human capital has been recognized by economists to be a key prerequisite for a country socio-economic and litica1 transformation (Eigbiremolen & Anaduaka, 2014).

The concept of human capital refers to the abilities and skills of human resources of a country while human capital formation refers to process of acquiring and increasing the number of persons who have the skills, education and experience that critical for economic growth and development of a country (Okojie, 2005)

Human capital refers for the know-how, capabilities, skills and expertise of citizen of a country (Dzinowoki, 2000). Dees and Dicen (2000) stated that human capital is generally known to consist of the individual’s capabilities, knowledge, skills and experience as reservoir of knowledge, skills and experience through individual learning. Among the generally agreed causal factors responsible for the impressive performance of the economics of most of the development and newly industrializing countries is an impressive commitment to human capital formation (Adedeji & Bamidele, 2003; World Bank, 2005 and Baro, 2005). Record has showed that no country has achieved sustained economic development without substantial investment in human capital (Oluwatobi & Ogunrinola, 2011).

Many great educationists and authors of repute have tried in the past and others are still trying to give a precise and concise definition of education. According to Pestalozzi (2007) education is naturally harmonious and progressive development of man’s inmate powers. This definition stresses that man naturally is endowed with certain inborn powers and capabilities and task of education is to bring about development.

Education in a broad sense is a process by which an individual acquires the mainly physical and social capabilities demand by the society in which he/she is born into the function (Uwadia, 2010). It is the process of acquisition of knowledge that is, it involves the teaching and learning process (Edunen, 2009).

Appleton and Leal (2008) describe education and health as components of human welfare Health and education are often subsidized by the state and in some countries education is compulsory for certain minimum length of time. The belief in human capital as a necessity for growth started in Nigeria during the implementation of the 1995 -1960 Development plan. Expenditure on education became a matter of serious consideration from 1960 of Asbby Commission report on (investment in education) which led to the increase in the University Places available to Nigerians.

Today with the importance of knowledge in the economy, human capital has increasingly attracted both academic and public interest. However, the UNICEF in its state of the world’s children’s report for 1999 points out that about four million Nigerian children have no access to basic education, and that major of these that mange to be in schools are given substandard education (Akhaine, 2009). There has been tremendous increased in schools enrolment in Nigeria especially in primary and secondary schools. The World Development Indicator (2016) shows a 65.8 and 52.6 rates of Primary and second schools enrolment in Nigeria respectively Also, available statistics show that federal government budget on education between 2000 and 2Ol6has been below 10% of the total fall below the UNESCO recommendation of 26% (Igbuzor, 2017).

The federal government reformed agenda is anchored on the National Economic Empowerment Development Strategy 2002 (NEEDS) document, which focus on attaining adult literacy rate of at least 65% by 2017. In this respect, the NEEDS recognize the centrality of human capital development as a vital tool for transformation and enhancing economic growth. Therefore, the strategy aims at empowering the citizen to acquire skills and knowledge that would prepare them for a better life. Based on the UNESCO latest reports 2015, clearly Nigeria is still very far from meeting the global economic development target of 2015 (Oboh, 2016).

1.2     Statement of the Problem

Nigeria as a country is immensely endowed both in natural and human resources. The pool of resources from one end to the other is unqualifiable to such extent that, given a dynamic leadership, economic prosperity would have been achieved in late 20th century.
Adelakun (2011) remarks that the primary focus of Nigeria finding a way to accelerate the growth rate of national income was the engagement of structural transformation of her subsistence and resources based economy to a production and consumption based economy in order to break the cycle of poverty, low productivity and stagnation. Inspite of all these abundant resources, Nigeria has failed to realize her full development potential with the topmost priority currently given to Sustainable human capital development or people oriented development by many countries and multilateral organization such as UNDP. The rate of illiteracy is very high in Nigeria; most of the workers’ technology is obsolete, hence they make use of out dated capital equipment and methods of production. By implication, their marginal productivity is extremely low and this leads to low real income, savings and investment are low. Consequently, leading to low rate of capital formation and low growth (Jaiyeoba, 2015).

The strategy aimed at empowering the citizenry to acquire the skills and knowledge that would prepare them for the vast challenges. Nigeria had invested in informal education for a period not less than 167 years (1842 to 2009). The number of primary schools had grown to above 50,000, 8275 post primary institutions and over 77 universities. Nigeria’s higher institutions have been-turning out not less than 120,000 graduates yearly.

The Federal Government and some corporate bodies via Educational Trust
Fund (ETF) had been funding education. However, comparing education
funding in some countries in the sub-African region, it is observed that Nigeria had never in any year meet the minimum standard prescribed by the NESCO which is 26% of total expenditure or annual budget. Education expansion in Nigeria does not seem to equally match with expansion in economic growth (Ajayi, 2016). For instance, between 1970 and 1980, growth in primary school was 141 %. For the post primary institutions, the percentage increase between 1970 and 1980 was 133% and 157% between 1980 and 2000. Tertiary institutions percentage increase between 1970 and 1980 is 160% and between 1980 and 2000 is 101%. Even more astronomical is the student intake at various levels of school. For primary schools, between 1970 and 1980 is 247% and between 1980 and 2015, was 104%. In terms of post primary institutions the growth rate of intake between 1970 and 1980 is 99%, between 1980 and 2015 is 239%. For tertiary institutions, the intake between 1970 and 1980 is 299%, between 1980 and 2015, 1689%. Equally, e growth rate of GDP (at 1984 factor cost) between 1970 and 1980 is .6% and 1980 and 2015, 25%. The growth in GDP is a distant comparison with the growth in the schools intake. Unfortunately, observing the growth of GDP per capital was -15.0,127, 5.1 and -4.4 measured in percentage point for the years 1981, 1991, 2001 and 2015 respectively (Ajayi, 2016).

For Knowledge Economy Index (KEI), Ume (2016) states the following: South Africa 5.08, Mauritius 4.32, Egypt 3.77 and Nigeria 1.55. The simple observation here is that Nigeria stands at the bottom of knowledge economy. Education is generally considered to be instrument of poverty reduction, but Nigeria’s case appears to be different. There is high level of poverty in Nigeria. The Human Development Index Report (2016) shows that Nigeria ranked 153 with a value of 0.47 1 among 187 countries. This also indicates that investment in human capital is not given priority in Nigeria. Accordingly, there is the need to examine the level of government spending on the education and health sectors, and give policy recommendations as regards their inefficiencies so as to help curb the menace of poverty in Nigeria.

Based on the above premises, this study seeks to answer the following questions.

i.                    Does growth in government expenditure on education significantly influence gross domestic product (GDP) in Nigeria?

ii.                 Does growth in government expenditure on health significantly influence gross domestic product (GDP) Growth in Nigeria?

1.3       Objectives of the Study

The main objective of this study is to investigate the nexus between human capital investment growth and economic growth in Nigeria. The specific objectives are to:

i.                    Evaluate the relationship between growth in government expenditure on education

and economic growth in Nigeria

ii.                 Examine the relationship between growth in government expenditure on health and economic growth in Nigeria.

1.4       Research Hypotheses

The following hypotheses are formulated and tested:

H0:      Expenditure on education has no significant impact on economic growth in

            Nigeria.

H1:      Expenditure on education has a significant impact on economic growth in Nigeria.
HO:      Expenditure on health has no significant impact on economic growth Nigeria.

H1:      Expenditure health has a significant impact on economic growth in Nigeria.

Note: In this study, human capital development (HCD) and human capital investment are          used interchangeably and proxied by government expenditure on education and            health.

1.4       Scope of the Study

            The study focus on the impact of human capital investment growth on economic

growth in Nigeria from 1980 to 2017. The study also attempt to empirically evaluate the contribution of government expenditure on education and health, enrolment rate in secondary and life expectancy on economic growth in Nigeria. The study discussed the human capital strategies, problems of human capital development in Nigeria and impact of human capital development on productivity in Nigeria. The equally discussed different theories relating to human capital development and economic growth.

1.6       Significance of the Study

Since economics of education has been relatively a new field in developing economies such as Nigeria, this study becomes relevant in exposing the role of human investment on economic growth; as such the role of education on economic growth in Nigeria has not been extensively captured in literature. Thus, findings on the relationship between government expenditure on health and education, and economic growth in Nigeria has becomes glaring that more studies need to be done. This study will serve as a unique force in resolving the issues.

The case of human capital investment has becomes crucial, in the light of this, this study relevance since the inherent empirical analysis will expose the major distortions surrounding the development process of human capital in Nigeria. This study will identify the extent to which high-level manpower has been developed and utilized in Nigeria as well as contribution to economic growth. It is equally hoped that this research would serve as reference sources for other researcher and for policy consideration in the political economy.

1.7       Organization of Study

            This study is divided into five chapters. Chapter one, which is the introduction presents the background to the study, statement of the problem, objectives to the study, research hypotheses, scope of the study and significant of the study. Chapter two, the literature review, dwells on conceptual issues, theoretical literature and empirical literature. Chapter three presents research methods, which includes theoretical framework, model specification, sources of data and methods of data analysis. Chapter four contains the data presentation, analysis of data and interpretation of results, while chapter five focuses on the summary, conclusion, recommendations and references.

1.8       Meaning of Key Terms

The following key terms used in this study were defined as follows:

Capital: capital is refers as factors of production used to create goods or services that are not themselves significantly consumed in the production process. For example, labour, machine, land, capital that use in production process.

Human Capital: this means the human factor in the production process which consists of the combined knowledge, skills or competencies and abilities of the workforce.

Investment: Investment refers to any mechanism used for the purpose of generating future benefit.

Economic Growth: Economic Growth is taken as the sustained increase in per capital national output or net national product over a long period of time. It occurs when a nation’s production possibility frontier shifts outward.  Also, it is regarded as increase in a country’s productive capacity, as measured by comparing the gross national product in a year with that of the previous year.

Government Expenditure: Government expenditure refers to the expenses which government incurs for its own maintenance, the society, the economy and helping other countries.

Government Expenditure on Education: Government expenditure on education refers to the expenses which government incurs in educational sector such as in the provision of learning facilities, school buildings, libraries material, furniture, salary payment, etc.

Government Expenditure on Health Services: Government expenditure on health services refers to the expenses which government incurs in the health Sector such as in the provision of health facilities, hospital buildings, prevention and curative medicines for the citizens, payment of salaries of health workers, etc.

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