Effect of Human Capital Development on Economic Growth in Nigeria

Abstract

This study examined the effect of human capital development on economic growth in Nigeria between 1999 and 2025, with particular attention to how insecurity and corruption shape the returns to government investment in education and health. The broad objective was to critically evaluate this relationship, disaggregated into four specific objectives: examining the contribution of government educational expenditure to economic growth, evaluating the effect of government health expenditure on economic growth, examining the effect of educational expenditure on economic growth in an insecure society, and determining the effect of health spending on economic growth in a corrupt society. It also adopted an ex-post facto research design, relying on quarterly secondary data (1999Q1-2025Q4) sourced from the World Bank Development Indicators, World Governance Indicators, the National Bureau of Statistics and the Central Bank of Nigeria Statistical Bulletin. Two models were estimated using the Autoregressive Distributed Lag (ARDL) bounds testing approach: Model 1 examined the effect of human capital development on growth in an environment devoid of corruption and insecurity, while Model 2 introduced interaction terms capturing corruption and insecurity. Unit root tests confirmed that the series were a mix of I(0) and I(1), satisfying the pre-condition for ARDL estimation, and the ARDL Bounds Test (F-statistic = 4.947168) confirmed a unique long-run cointegrating relationship among the variables. In Model 1, government health expenditure exerted a positive and statistically significant long-run effect on economic growth, while government educational expenditure showed a statistically significant but negative long-run effect; the error correction term (-0.128798) indicated that roughly seven years and seven months are required for the system to return to long-run equilibrium following a shock. In Model 2, once corruption and insecurity were introduced into the model, all three human capital indicators examined—education, health and life expectancy—turned adverse for economic growth. The study concludes that government efforts to build human capital for stronger economic growth in Nigeria are being undermined by the co-existence of rising insecurity and corruption. It recommends a robust monitoring and evaluation system for education and health funding, prioritised investment in resilient and accessible education and healthcare systems in vulnerable and conflict-affected areas, stronger public-private partnerships, and the urgent strengthening of anti-corruption institutions such as the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices Commission (ICPC).