Human Capital Development and Economic Growth Nexus in Nigeria: Aggregate and Sectoral Analyses

Abstract

Despite Nigeria’s abundant human and natural resources endowments, and sustained investments in education and health, the country’s growth performance remains volatile and structurally imbalanced, raising concerns about the efficacy of human capital accumulation in translating these resources into sustainable and inclusive growth across sectors. This study therefore investigates the impact of human capital development on aggregate and sectoral economic growth in Nigeria by applying the Autoregressive Distributed Lag approach and the Toda-Yamamoto modified Wald causality test to annual time series data spanning 1981-2023. Economic growth is proxy by aggregate real gross domestic product (RGDP) and its sectoral components of agricultural (AGDP), industrial (IGDP) and Services (SGDP) while human capital development is proxy by human capital index (HCI), life expectancy (LIFE) and mortality rate (MOTA). The control variables include total factor productivity, gross fixed capital formation, population growth, institutional quality and exchange rate. Findings indicate significant short-run and long-run impacts with notable sectoral asymmetries. Human capital index significantly stimulates AGDP and made positive short-run impact on RGDP, IGDP and SGDP, though its lagged impact on SGDP is negative. Life expectancy made insignificant positive impact on RGDP and negative impact on sectoral growth while mortality rate undermines aggregate and sectoral growth, highlighting persistent health constraints. Causality results reveal that HCI causes aggregate and sectoral growth, LIFE causes IGDP whereas MOTA causes aggregate and sectoral growth. These results support human-capital led growth hypothesis and underscore the need to complement uniform growth policy interventions with sector-specific growth policy strategies so as to promote sustainable and inclusive economic growth in Nigeria.