DYNAMICS OF HUMAN CAPITAL FORMATION AND ECONOMIC GROWTH IN NIGERIA

The study examined the dynamic relationship between human capital formation (education and health) and economic growth in Nigeria. It investigated the mechanics of human capital formation in Nigeria from 1970 to 2014 using the Vector Error Correction Model (VECM). The impulse response function results indicated that school enrolment and government expenditure on education reduces labour force in the short-run. However, government expenditure on health and economic growth reflexed increased labour in the study. The variance decomposition of labour and school enrolment accounted for economic growth in Nigeria. Government expenditure on education and health in the short run periods were seen as present sacrifice an economy makes for future economic growth as they positively affected economic output levels only in the long run. The granger causality result showed that human capital formation (ENROL, GEE, and GEH) granger cause labour force, but these nexus did not translate to economic growth in the study. Hence, further investment in human capital formation (precisely on equipping the youths with requisite skills) in the production process in the Nigerian economy to boost economic growth.