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CHAPTER ONE INTRODUCTION 1.1 Background of the Study In the past, Human Capital Development (HCD) was not seen as a development issue partly because it was viewed as given in the industrialized economies. However, when all efforts at development failed usefully in the less development economies, especially Nigeria as a case study renewed attention was paid to the role of human (and social) capital in the development process and not only attribute to natural Capital endowment. Human Capital development tends to improve the quality and productivity of labour which in turn, leads to economic growth. Sadly enough, development planners have failed to make investment in HRD a central focus of development strategies. The reason it is sometimes argued, is the difficulty involved in distinguishing between what part of HRD represent an investment and what part represent consumption ( Da Silva 1997 and Oshina 1986). It is now largely and generally accepted that investment in human Capitals promotes economic growth. However, a country’s economics capacity also determines its ability to invest in human Capitals, so that a good educational system may be the flower of economic development , but it is also the seed. Besides acting as an important vehicle of achieving equitable income distribution, human Capital development is also a potent means of addressing the problem of poverty. In the words of Harrison (1973:3): Human Capital constitutes the ultimate basis for the wealth of a nation’s capital. Capitals are passive factor of production; human beings are the actives agent who accumulate capital, exploit natural Capitals, and build social, economic and political organization. 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. Economist had long realized the importance of human Capital development in the development process. For instance, the emphasis on the importance of education at various levels in the wealth of nation, Adams Smith (1937) specifically includes the acquired and useful ability of all inhabitants or members of the society in his concept of fixed capital. Alfred Marshal (1930) also emphasized the importance of education as a national investment and in his view the most valuable of all capital is that invested in human being. In spite of the scholarly discovery of the importance of human Capitals , a more recent effort was tutored to invest in education as a panacea for economic advancement and improvement. The United Nation Economics Commission for Africa (UNECA) (1990) describe human Capitals as the knowledge, skills, altitudes, physical and management effort required to manipulate capital, technology, and land among other things, to produce goods and services for human consumption In other words, Human Capital development can therefore be conceived as the process of developing the skill, knowledge and the capabilities of all the people of the society which are needed in the labour market for the production of goods and services. In economics terms, it could be described as the accumulation of human capital and its effectiveness in the development of an economy (Harrison and Mayers,1964). On the Nigeria scene, Professor Frederick Harbison introduced the concept of investment in human capital – his contribution as the manpower consultant to the famous Ashby Commission (1960). The commission report titled Investment in Education was published in 1960 and for the first in the history of education development efforts. It is interesting to note that Nigeria was one of the first developing country to embrace the concept of human capital formation. The purpose of this study is to investigate the impact of Human Capital Development (HRD) on economic growth in Nigeria as well as compare and contrast the past and present government policies towards educational improvement and the rationale for quality education as a determinant of economic growth in most developing economies and ways of attaining Millennium Development Goals (MDGs) by 2020 in the host country, Nigeria. Technically advanced human Capitals and a growing knowledge base appear to be part of this well spring of growth. An implication of Lucas’ hypothesis on human Capitals is thus associated with investment in man and his development as creative and productive Capitals (Harbison,1962). As the global economy shifts towards more knowledge-based sectors (e.g. the manufacture of devices, pharmaceuticals, telecommunications and other ICT based services), skills and human Capitals development becomes a central issue for policy makers and practitioners engaged in economic development both at the national and regional level (OECD,1996); yet the impact of education and vocational training activities exert up on changing national and regional economies remain less than thoroughly explained and analyzed. Since the introduction of human Capitals theory in the 1960s, a number of studies have attempted to address this and related issues. Today, the global economy is divided into two parts comprising of a few rich nations regarded as the developed countries (DCs) and many poor nations regarded as the less developed countries (LDCs). DCs are characterized by high productivity while the LDCs are characterized by low productivity. According to the level of human Capitals development and per capita income, Nigeria is classified under the LDCs. Nigeria as a country is immensely endowed both in natural and human Capitals. The pool of Capitals from one end to the other is unquantifiable to such extent that, given a dynamic leadership, economic prosperity would have been achieved in late 20th century. The primary focus of Nigeria has been finding a way to accelerate the growth rate of national income and to engage in structural transformation of her subsistence and Capital based economy to a production and consumption based economy in order to break the cycle of poverty, low productivity and stagnation. In spite of all these abundant Capitals, Nigeria has failed to realize her full development potential with the topmost priority currently given to sustainable human Capitals development or people oriented development by many countries and multilateral organizations, e.g. UNDP. A review of the Nigerian economy has become quite appropriate as a way of understanding more comprehensively her human Capitals development. Human Capitals refers to the abilities and skills of human Capitals and human Capitals development refers to the process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for the economic growth of the country ( Harbison, 1962). Therefore, what really matters in Nigeria is the empowerment of people and the mobilization of economic surplus into productive investment channels. There is also the need for the Nigerian economy to eliminate or minimize those constraints towards human Capitals development so as to enhance rapid economic growth. Human Capitals refers to the abilities and skills of human Capitals and human Capitals development refers to the process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for the economic growth of the country ( Harbison,1962). Therefore, what really matters in Nigeria is the empowerment of people and the mobilization of economic surplus into productive investment channels. There is also the need for the Nigerian economy to eliminate or minimize those constraints towards human Capitals development so as to enhance rapid economic growth. 1.2 Statement of the Problem The concept of human capital formation refers to a conscious and continuous process of acquiring requisite knowledge, education, skill and experience that are crucial for the rapid economic growth of a country (Harbison 1973; Salleh 1992). The importance of human capital has been emphasized in the world Bank report on Sub-Saharan African (1989) which calls for a doubling of public expenditure on human Capitals development from 4-5 percent of GDP in 1985 to 8-10 percent by years 2000 (world Bank 1989;Okojie 1995). Therefore, the research work was necessitated to address the problem of inadequate funding of the educational system in Nigeria, as confirmed in the work of Central Bank of Nigeria (2000). In term of the extent of very low budget allocations to education as compared to others. Furthermore, that the federal government allocation to education ranged between 0.6 and 9.0 percent for recurrent and 1.0 to 2.8 percent for capital expenditure of the federal Government budget for the period of 1992 – 1996. Thus, the government of Nigeria in the NEEDS programme recognize that one of the main Challenge facing the educational institution in the country was inadequate funding. Another problem that this study addresses is the problem of poor infrastructure for learning in most institutions, which has adversely affected the role of education in economic growth. The tremendous increase in enrolment at all levels of education and training have been affected because of poor and declining quality of the trained manpower concerned without geometric increase in the public expenditure of most developing countries towards the actualization of the Millennium Development Goals. (Yesufu 2000; 344) 1.3 Objectives of the Study The broad objective of this research is to critically examine the impact of human Capital development on the economic growth in Nigeria. 1.4 Specific Objectives of the Study Include: To examine the importance of channeling more financial Capitals into human capital formation. To evaluate and access the trends of federal Government allocation to both Capital and recurrent expenditure on education system. To empirically measure the linkage between Human Capital Formation and economic growth, especially among developing countries To identify the salient role of human capital development toward the Millennium Development Goals (MDGs) by 2020. 1.5 Scope of the study The study will cover the impact of human Capital development on the economic growth in Nigeria from 1993-2013. It shall cover a period of 20 years. 1.6 Hypotheses of the Study Given the aforementioned bi-directional nexus between Human Capital development and economic growth in the literature of the World War II and International Labour Organization (ILO) respectively. The following hypothesis formulated and tested for this research work as: H0: Human Capitals development does not have an impact on economic growth in Nigeria. H1: Human Capitals development does have an impact on economic growth in Nigeria. 1.7 Justification of Study The study of this nature is prompted by the slow rate of Nigeria’s economic growth despite the huge contribution of the government in the economy. Researches on this topic being carried out over the years have not really achieved its prior objective. The effect of human Capitals development on economic growth holds a lot of benefits to our overall economic progress. The government and its agencies will find this work Capitalful in policy, directives and regulations for human Capitals development to aid economic growth. 1.8 Research Questions The following questions were considered in the course of this study;
1.9 Methods of Data Collection The study will employ secondary source of data collection method such as journals and publication of Central Bank of Nigeria (CBN), Federal Office of Statistic (FOS) now National Bureau of statistic (NBS), World Bank, Nigeria Institute of Social and Economic Research (NISER), Economic and financial review of Central Bank of Nigeria. 1.10 Method of Data Analysis Most similar studies cited in literature had their methodology anchored on economics and econometrics, i.e. formulation of economic models and utilizing regression analysis to establish how various variables in the model impact on the subject of study, hence, the study employed the use of ORDINARY LEAST SQUARE (OLS) method of estimation with data set from 1993-2013 to test the empirical relationship existing between Human Capitals Development and Economic Growth. 1.11 Definition of Terms In other to help reader understand and appreciate this study, it is necessary to define some relevant terms and those that will occur frequently in the presentation of this essay. The terminologies are as follows: Impact: to have an effect on, influence, alter. Human Capitals: is the set of individuals who make up the workforce of an organization business sector, or economy. Development: the process of gradually becoming bigger, better, stronger, or more advanced. Economic growth: is the increase in the market value of the goods and services produced by an economy over time. Education: the act or process of imparting or acquiring general knowledge, developing the power reasoning and judgment and generally preparing oneself or others intellectually for mature life. It is also the act or process of imparting or acquiring particular knowledge or skills as for profession. We can also define as a degree, level or kind of schooling.
Keywords: EXAMINATION OF THE RELATIONSHIP BETWEEN HUMAN CAPITALS AND ECONOMIC GROWTH IN NIGERIA
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