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The Concept Of Human Capital Economics Essay


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In recent times, the development of human capital has been the focus of concern towards the development of a nation. This is for the fact that the growth of tangible capital stock of a nation depends to a considerable degree on human capital development. Without adequate investment in developing the human capital which is the process of increasing knowledge, skills and the capacities of people in the country, the possibility of the growth of that nation might be minimal. Historical evidences proved that advanced countries depended on education of their rapid economic growth, such as those of United States, former Soviet Union, Denmark and Japan. There were significant relationships between their economic growth and the quantum and kinds of education provided to their work-forces (Miachi, 2006). Health and education are both components of human capital and contributors to economic welfare. Thus, according to Lyakurwa (2007), human capital development has the capacity to enlarge people's choices and opportunities, improve healthy living through acquired skills and knowledge and eventually enhance growth in the nation's gross domestic product through increased productivity.


The concept of human capital formation refers to a conscious and continuous process of acquiring and increasing the number of people with requisite knowledge, education, skill and experience that are crucial for the economic and political development of a country (Odusola, 1998). Human capital is so important that in the Khartoum Declaration of 1988, it was asserted that:

…the human dimension is the sine qua non of economic recovery …no SAP or economic recovery programme should be formulated or can be implemented without having at its heart detailed social and human priorities. There can be no real structural adjustment or economic recovery in the absence of the human imperative (Adedeji et.al. 1990: 390)

A. W. Lewis is said to have begun the field of Economic Development and consequently the idea of human capital when he wrote in 1954 the "Economic Development with Unlimited Supplies of Labour.

The use of the term "human Capital" in the modern neoclassical economic literature dates back to Jacob Mincer's article "Investment in Human Capital and Personal Income Distribution" in The Journal of Political Economy in 1958. Then T.W. Schultz who is also contributed to the development of the subject matter, the best-known application of the idea of "human capital" in economics is that of Mincer and Gary Becker of the "Chicago School" of economics. Becker's book entitled "Human Capital", published in 1964, became a standard reference for many years. In this view, human capital is similar to "physical means of production", e.g., factories and machines: one can invest in human capital (via education, training, health) and one's outputs depend partly on the rate of return on the human capital one owns. Thus, human capital is a means of production, into which additional investment yields additional output.

Modern growth theory sees human capital as an important growth factor economic growth. Human capital may be defined as the total stock of knowledge, skills, competencies, and innovative abilities possessed by the population. Among the most important changes that characterize the 21st century are, "the increasing importance of knowledge as a driver of economic growth; the information and communication revolution; the advent of a worldwide labour market and global socio-political transformations" (World Bank 2002).

Numerous quantitative studies of the studies of the sources of economic growth in the west have demonstrated that the growth of human capital has been the principal source of economic growth (Todaro, 1985). The outstanding experiences of the fast growing Asian economies such as Taiwan, Hong Kong and South Korea are perhaps obvious examples of the importance of human capital to economic growth. Despite the lack of natural resources, these countries have managed to grow faster than any other country, because they have had higher quality in human capital (Becker, 1992).

Economists and other social scientists have applied the concept of human capital since the 1950's in, many ways (Bryan, 1990). Schultz (1972), who is considered a pioneer in human capital theory, classified investment in human capital into investment in:

Schooling and higher education.

Post-school training and learning.

Pre-school learning activities.




Investment in children.

Hence, the concept of the human capital has been used in a variety of ways. Becker (1975), for example, in his book human capital discussed investment in human capital in the context of the labour market. Investment in human capital also could be discussed in relation to changes infertility decisions and mortality (Becker, 1992)

In the developed nations like the United States of America, Britain and Japan, human capital formation constitutes the major element in the overall strategies for socio-economic development. In Nigeria, the drive at human capital development had not acquired such momentum. That notwithstanding, there had been some attempts in the country at the human capital development via educational planning such as the Ashby Commission of 1960 on "investment in education" which led to the increase in the university places in Nigeria. Prior to the aforementioned Ashby Commission's Report was the report of the Federal Advisory Committee on Technical Education and Industrial Training 1957 and it was to advice the minister on the development and training including the common training required to meet industrial and commercial needs. These two national efforts among others marked the beginning of the national consciousness of the need to develop human capital for the overall socio-economic growth in Nigeria.

Myers (1964) maintained that the most obvious way of developing human capital is formal education, beginning with the first level education, continuing with various forms of post primary education and post-secondary education. Furthermore, that education is one of the main domains of public intervention in the social sectors where the most spectacular results have been achieved. This national consciousness of the significance of education in Nigeria education system has stilled proved inadequate to reach the universal primary education and suppress the regional (zonal) and gender disparities in access. The characteristic distribution of the population reveals a high proportion of young as a result of improved primary health care which impact upon infant mortality rate coupled with high fertility rate among Nigerian women. In the seventies precisely, the massive reconstruction after the civil war and the oil boom stimulated industrial, commercial enterprises and various services, but Nigeria education system was not able to keep up with the manpower

demand, nor could it produce the required human capital in the labour force. One of the most obvious reasons for the poor performance of Nigeria education system is poor financing.

According to Adesina (1980) the implications of Nigeria government assuming total financing of education system are far reaching. It means that the amount of education to be provided in a given year would solely be determined by the amount government is willing and able to give to education. Furthermore, the volume of education has to be drastically pruned down any time government declares its inability to meet the financial requirements of the system. Indeed, this

Was what happened in the second - half of the 1980s right from the instance of Structural Adjustment (1986) in the country where severe financial and economic constraint affected all levels of education and their capacity to provide services. In the first national Rolling Plan Document (1990-1992) it was pointed out that the sharp fall in federal government subvention especially to the universities from which they have never recovered since 1984 explains their present financial predicament with regard to the implementation of their capital projects.

It is pertinent to note that in Nigeria, the government as well as the public can attest to the fact that the overall education system is underfunded and poorly financed, which render it incapable of playing its main role in human capital development.

Human capital development as a process of increasing human knowledge, enhance skills in vocational, technical education and health care for increase in productivity and stimulate resourcefulness of trainees should be systematic, sustainable and strategic. The process should be systematic to the extent that there should be a plan for which previous activities will provide support for upcoming activities while facilitating the attainment of set goals. The process should be sustainable since the product (human capital) must make desired and enduring impact on the organsation or society. The process should be strategic to the extent that there are well-defined goals and targets whose attainments are time bound. It should be dynamic, responsive and result oriented; continually evolving and proactive to address emerging challenges (Akingbola, 2011).


Uwatt (2002) empirically examined the impact of human capital on economic growth, using five variants of the original Solow Model linking physical capital, labour and human capital proxied by total enrolment in educational system to real Gross Domestic Product. The result showed that physical capital exerted a positive and very statistical impact on economic growth. Its coefficient was statistically different from zero at 5% significant level. Labour force that entered all the models in log form had also positive but statistically insignificant effect on economic growth. On human capital variable, it was human capital from primary school education that was statistically very significant on the growth of the Nigerian economy. In the case of tertiary education, the result failed to tally with a priori expectations. One of the reasons advanced by Uwatt was that Nigerian tertiary institutions produce more graduates in humanities than in Mathematics and Sciences. Prior to the study undertaken by the World Bank's (2010), Odia and Omofonmwan's (2007) had reported that the Nigerian education system was constrained by several challenges, which included poor funding, poor educational infrastructure, inadequate classrooms, lack of teaching aids (such as projectors, computers, laboratories and libraries), dearth of quality teachers and unconducive learning environment. Moreover, they pointed that many social vices, such as examination malpractice, cultism, hooliganism, and corruption, have emerged from the school system. These in addition, compound the problems that impede the nation's ability to cultivate the kinds of people that can serve as tools to facilitate economic improvements.

Scholars have not been able to resolve whether higher government outlays on education will always boost growth or not. They have not resolve the question: why might higher spending be ineffective? However, one reason, according to Baldacci, Clement, Qui and Gupta, 2005 is the macroeconomic effects of excessive public outlays.

Chete and Adeoye (2002) studied the empirical mechanics through which human capital influences economic growth in Nigeria. They attempted to achieve this objectives using vector Auto regression analysis and ordinary least square to capture these influences. They however concluded that there is an unanticipated positive impact of human capital on growth which the various Nigerian governments since the post-independence have appreciated by prodigious expansion of educational infrastructure across the country; but they are quick to point out that the real capital expenditure on education and health have been rather low.

Therefore, there has been a growing interest to extend the relationship between health and economic growth, catalyzed in considerable extent by a 1993 World Bank report on health (see World Bank 1993). Barro (1996) comments health is a capital productive asset and an engine of economic growth. Using this argument, we can consider health as a determinant of human capital. Likewise, Mushkin (1962) indicates human capital formation, with the help of health services, and education are based on the argument that people develop themselves when they invest in these assets and will earn a future return with them. Grossman (1972), Bloom and Canning (2000) explain healthy individuals are more efficient at assimilating knowledge and, in consequence, obtain higher productivity levels. Hamoudi and Sachs (1999) argue there is a cycle of simultaneous impact between health and wealth.

In an early empirical review of the impact of health on economic development, Sorkin (1977) concluded that health, seen through reductions in mortality, had an important impact on economic growth during the early twentieth century. However, he comments increases in the health status of the population of developed nations will have little impact on economic growth, but the impact could be different for developing nations. For this matter, he points out several ways how health programs could have an impact on economic development on developing nations.

The first way is through productivity gains and increasing man-hours of work. Jack (1999) explains productivity of labour depends on factors like physical and mental capabilities, investments in human capital and efficiency of labour organization and management, and emphasizes changes in health could affect labour productivity through the previous channels. Also, labour productivity could also be reduced by the need to care for sick relatives or by reducing years of schooling if parents are chronically ill. On the other hand, improvements in health could positively affect the experience level of the work force by increasing their life expectancy and good health status condition.

The second way is making feasible the development of previously unsettled regions. Sorkin (1977) mentions a major health program could initiate the development of areas where economic activity was deterred unfavourable health matters. Bryant (1969) indicates health and health services can improve or retard economic development and social and economic changes within a region.

The third way is improving innovation and entrepreneurship by changing the attitudes of people. Malenbaum (1970) used a step wide regression equation with macroeconomic data of 22 poor countries, using agricultural output as the independent variable, with several social, economic and health data as dependent variables. With this, he showed how the influence of health factors on output seems to be larger compared with other economic and social variables. As a conclusion, Malenbaum (1970) suggests health programs could change the happenings of the lives of the poor by taking their own decisions and to have the feeling to influence the events on their everyday activities, which often accept them as pre-ordered.

There is large body of empirical evidence to support the claim that there is a positive relation between education and health. In their survey of non-market outcomes of education, Wolfe and Zuvekas (1997) identify five health and health related effects of Education:

• A positive relation between one's education and one's own health status.

• A positive association between schooling and the health status of one's family

members (in particular on one's children).

• A positive link between one's own schooling and the schooling received by one's


• A positive contribution of schooling to the efficiency of (consumer) choices (i.e.

on smoking and on the use of health care).

• A relation between schooling and one's own fertility choices and the fertility

choices of one's children (in particular a negative effect on the probability of

giving birth out of wedlock as a teenager).


Economic growth is essential for sustainable development. There is a strong link between economic growth and improvement in living standard. Economic growth is quantitative sustained increased in the countries per capita output or income accompanied by expansion in consumption, capital and volume of trade (jhigan,2001). Among the notable macroeconomic objectives, economic growth has been one of the most important for a long time in Nigeria. Growth is an important objective of economic policy particularly in Nigeria because it is the key to a high standard of living, it brings increasing revenue which more and better schools, hospitals, and other social services. Economic growth makes it easier politically to carry out policies of income distribution. Durable growth requires sustainable policies-ones that do not give rise to accelerating inflation for its attainment. There could be no significant economic growth in any country without adequate human and natural resources. In essence, Ojo (1996), explained that improved human beings, human capital formation is fundamental to nations economic progress will not complain about their education, health, food, housing and security among other things, therefore the improved humans beings are better producers who contribute positively to economic growth and its sustainability.

The concept human capital refers to the abilities and skill of human resources of a country (Adamu,2000), while human capital formation refers to the process of acquiring and increasing the number of persons who have the skills, education and experiences that are crucial for the economic growth and political development of a country (Okojie,1995). Human capital formation Okojie (1995), concludes is thus associated with investing in man and his development as a creative and productive process.

Effective investment in human capital is a key component of long term economic growth and increased productivity. A well educated population is an objective in itself as well as the conduct to accelerate social and economic development. According to the African Development Bank Report (1998), Human capital development is an essential means of sustained economic growth and poverty reduction and also an end itself.

World Bank (1995) assessment of 192 countries indicated that human capital on the average, accounts for 64% of the total wealth, while physical and natural capital accounts for 16% and 29%, respectively. Of all the contributory factors to economic development, human resources standout as the major factors that determines the manner in which of all other should be seen in the light of how economic growth is managed and distributed for the benefit of the people.

Babalola explained that the contribution of education to economic growth is resumed on its ability to increase to economic growth is presumed on its ability to increase the productivity of an existing labour force. According to him education contributes to economic growth in the following ways:

First, education inculcates skills such as engineering, medicines, law, accounting, computer science and teaching, which are useful in the production process.

Secondly, education imparts knowledge economic political science art, geography, philosophy, history, mathematics and logical reasoning which can contribute to the most important aspects of economic growth such as innovation, adaptation and entrepreneurship.

Thirdly, education provides job ethics and attitudes conducive to production of goods and services.

Finally, education serves as screening device for selecting or identifying talents in the most efficient manner. Therefore, education is capable of enhancing the efficient production of goods and services by ensuring through screening that the best people are made available for the world of research.

UNR (1996) expressed that education is fundamental to enhancing the quality of life and ensuring social and economic progress. Education plays a key role in the ability of a developing country to absorb modern technology and to develop the capacity for self-sustaining growth and development. Lee (1989) emphasized that the main problem associated with the belief that education is god for economic growth is linked with how to maintain an equilibrium position. That is, where there will be no incidence of either shortage or supply of educated people. A shortage of educated people might limit growth while excess supply of it might create unemployment and thus limiting economic growth.

Health comes next to education in the development of human resources. There is a symbiotic nexus between health and education. Education facilities general in the population as well as acquisition of the varied and much needed skills for the transformation of the society, have the tendency to foster a change in the attitudes and habits which may be conducive to the attainment of high health status particular amongst people in the developing countries where the major causes of the deaths are largely preventable. So far, for the manpower resource of a nation to be utilized, harness the other resources of a nation, the population must be healthy. Without good health, productivity is low and to ensure adequate productivity, the majority of the population needs to be protected from illness. A strong and healthy labour force is an essential actor in development, it signifies absence of disability and discomfort.

According to Yesufu (2000), a good health policy is a means by which government can at once, ensure that manpower is generated in the right mixes, distributed in accordance with national priorities and ensure the highest level of labour productivity. Health improvement influences morbidity and labour force productivity thereby enhancing the process and speed of economic development. Most development countries have given serious attention to the provision of public health, education and social welfare services. This is because; they believe that such measures could improve the quality of life of their people and their efficiency as productivity agents thereby accelerating the general socio economic development of their nations.

The world is talking about globalization, international property right and information technology and these are only achieved through sound education and good health care of the citizens. Since health and education status affects the individual participation in economic activities and consequently the level of the labour force in an economy, a re-examination of the level investment in the human capital and sustainable growth is imperative, hence, this re-examination is the principal focus of this study.


Education is an economic good because it is not easily obtainable and thus needs to be apportioned. Economists regard education as both consumer and capital good because it offers utility to a consumer and also serves as an input into the production of other goods and services. As a capital good, education can be used to develop the human resources necessary for economic and social transformation. The focus on education as a capital good relates to the concept of human capital, which emphasizes that the development of skills is an important factor in production activities. It is widely accepted that education creates improved citizens and helps to upgrade the general standard of living in a society. Therefore, positive social change is likely to be associated with the production of qualitative citizenry. This increasing faith in education as an agent of change in Nigeria, has led to a heavy investment in it. The pressure for higher education in many developing countries has undoubtedly been helped by public perception of financial reward from pursuing such education. Generally, this goes with the belief that expanding education promotes economic growth. Education occupies an important place in most plans for economic and social development. Whichever way one looks at it, the education sector is important in human development as a supplier of the trained manpower. It is a prerequisite for the accomplishment of other development goals. Also, it is the main sector through which national identity goals and aspirations are evaluated and realised (Adebiyi, 2003).

Therefore, positive social change is likely to be associated with the production of qualitative citizenry. It would seem to follow naturally that if more individuals were educated, the wealth of the nation would rise, since higher education attracts higher wages and in the aggregate, higher national income (Ayara, 2002). This increasing faith in education as an agent of change in many developing countries, including Nigeria, has led to a heavy investment in the sector and, thus, the delegation of responsibility for manpower development to the schools. The pressure for higher or school education in many developing countries has undoubtedly been helped by public perception of financial reward from pursuing such education. Generally, this goes with the belief that expanding education promoted economic growth (Ayara, 2002).

In Nigeria, primary schools prepare candidates for secondary education and while secondary schools prepare candidates for higher education at least for those candidates who have the academic capability and the required resource to further their education. A known examination that prepares candidates for higher education in Nigeria is the West African Examination Council (WAEC). In the year 2000, 725,575 candidates sat for WAEC and those that passed at the qualifying level that can earn their admission to higher institutions were 58,864; for 2001, the number that sat for the examination was 1,099,296 and those that qualified for admission to higher institutions were 178,054; for 2002, the number that took the examination was 1,224,381 and those that qualified were 188,494. In 2005, those that sat for WAEC were 1,742,663 and 203,991 qualified for admissions into higher institutions. What is meant here by qualification at this level to higher institutions are candidates that pass at credit level in 5 subjects including Mathematics and English. For graduate output in 2001, 47,791 were produced, 2002, 58305, and in 2005, 26042. Graduate output here refers to those who obtained their first degrees from various universities.

The concept of human capital formation refers to a conscious and continuous process of acquiring and increasing the number of people with requisite knowledge, education, skill and experience that are crucial for the economic and political development of a country (Odusola, 1998). Burneth et al. (1995) say that investing in education raises per capita GNP, reduces poverty and supports the expansion of knowledge. Education, it is argued, reduces inequality. Fishlow (1995), Persson and Tabellins (1994) and Alesina and Rodrik (1994) agree that inequality is negatively related to growth. Stiglz (1998) states, "Successful development entails not only closing the gap in physical or even human capital, but also closing the gap in knowledge."

Abridged education policies in Nigeria

Nigeria is of the opinion that education can help its growth and it evolved some educational philosophy in that direction. The five main national objectives of education as stated in the second National Development Plan, and endorsed as the necessary foundation for national policy on education (NPE Revised, 1998), are the building of:

1. A free and democratic society;

2. A just and egalitarian society;

3. A united, strong and self-reliant nation;

4. A great and dynamic economy;

5. A land of bright and full opportunities for all citizens.

Nigeria's philosophy of education is therefore based on the integration of the individual into a sound and effective citizen and equal educational opportunities for all citizens of the nation at the primary, secondary and tertiary levels both inside and outside the formal school system (NPE p.4).

The quality of instruction at all levels had to be oriented towards inculcating the following values:

1. Respect for the worth and dignity of the individuals

2. Faith in man's ability to make national decisions

3. Moral and spiritual values in inter-personal and human relations

4. Shared responsibility for the common good of society

5. Respect for the dignity of labour

6. Promotion of the emotional, physical and psychological health of all children.

One of the national educational aims and objectives to which the philosophy is linked is: The acquisition of appropriate skills, abilities and competences both mental and physical as equipment for the individual to live in and contribute to the development of the society. Governments were to take various measures to implement the policy as education was considered a highly rated investment in the national development plans as any fundamental change in the intellectual and social outlook of any society has to be preceded by an educational revolution. Government therefore set out step-by-step plans to implement primary education, secondary education, higher education including professional education, technical education, adult and non-formal education. Above all, university education was to be pursued with emphasis on research to expand knowledge horizon that lead to improved technology.

Nigeria had invested in formal 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. Comparing education funding of some countries in the Sub-African region, it is observed that Nigeria had never in any year met the minimum standard prescribed by the UNESCO, which is 26% of total expenditure or annual budget of an economy.

Education expansion in Nigeria does not seem to equally match with expansion in economic growth. 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, 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 2000, was 104%. In terms of post primary institutions, the growth rate of intake between 1970 and 1980 is 426% and between 1980 and 2000 is 239%. For tertiary institutions, the intake growth rate between1970 and 1980 is 299%, between 1980 and 2000, 1689%. Equally, the growth rate of GDP (at 1984 factor cost) between 1970 and 1980 is 77.6% and 1980 and 2000, 25%. The growth in GDP is a distant comparison with the growth in the schools intake. Unfortunately, observing the growth of GDP per capita was -15.0, -7.7,-5.1 and -4.4 measured in percentage point for the years 1981, 1984, 1990 and 1999 respectively (Ayayi, 2002).

There is also a question; to what extent had education in Nigeria contributed to knowledge economy, the current vogue in world economy? For knowledge economy index (KEI),

Umo (2006:5) states the following; South Africa5.08, 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 an instrument of poverty reduction, but, Nigeria's case appears to be different. There is high level of poverty prevalent in Nigeria. For the population living below $1 a day in SSA for the period 1970 to 2001, Nigeria had the highest percentage of 70.2, closely followed by Zambia 63.7% while the least is South Africa

1.3%. Also, the future direction of the macroeconomic policy of investing in educational capital in Nigeria is uncertainty may be attributed to the existence of macroeconomic disequilibrium in financial allocation and unsatisfactory performance of the country's economy in recent times. A review of Nigeria's economic development between 2000 to date revealed that overall macroeconomic policies and development strategies have failed to provide an enabling environment that could alter the structure of production and consumption activities in order to diversify the economic base. The country has continued to be a mono-cultural economy, depending on oil, indicating that the export base is yet to be diversified. Widening saving investment gap, high rate of inflation, chronic balance of payment problems and underutilization of resources have continued to be the order of the day. Poverty and inequality is wide spread with about 71million Nigerians living below $1 a day and the gini coefficient of 0.4. Socio statistics such as infant, under5, and maternal mortality rate as well as unemployment rate are higher than the averages for developing countries (Fakiyesi and Ajakaiye, 2009).

Bakare (2006) investigated the growth implications of human capital investments in Nigeria using autoregressive error connections mechanisms. The study revealed that there is a significant, functional and institutional relationship between the investments in human capital and economic growth in Nigeria. It was revealed that 1% fall in human capital investment led to a 48.1% fall in the rate of growth in gross domestic output between the paradox of education and economic growth in Nigeria using the standard growth-accounting model. The findings suggest that education has not had the expected positive growth impact on economic growth.

Babatunde and Adefabi (2005) investigated the long run relationship between education and economic growth in Nigeria between 1970 and 2003 through the application of Johansen cointegration technique and vector error correction methodology. Their findings reveal that the Johansen cointegration result establishes a long run relationship between education and economic growth. A well-educated labour force appears to significantly influence economic growth both as a factor in the production function and through total factor productivity. his shows that education matters to economic growth.

2.5 EFFECT OF HEALTH ON ECONOMIC GROWTH. Health is one of the most important assets a human being has. It permits us to fully develop our capacities. If this asset erodes or it is not developed completely, it can cause physical and emotional weakening, causing obstacles in the lives of people. The previous connection can be seen as the relationship between income and health. Life cycle models have explained how one's health status can determine future income, wealth and consumption (Lilliard and Weiss 1997; Smith 1998; Smith 1999).

Nigeria recognizes the right to health and has committed itself to its protection by assuming

obligations under international treaties and domestic legislations mandating specific conduct with respect to the health of individuals within its jurisdiction. Prior to the economic travails of the mid-1980s, the health sector witnessed robust growth, principally as a result of unfettered support by the government, coupled with assistance from international donor agencies. Except in rural areas, access to health care was readily available at public hospitals and clinics at no charge. However, by 1985, this positive development had screeched to a grinding halt, owing to a plurality of factors, two of which clearly stood out: precipitous economic decline and military usurpation of power, the latter marking the genesis of many of the intractable challenges besetting the health system. The current state of health in Nigeria is intertwined with its history of political governance. In its forty seven years (1960 - 2007) as an independent nation, the military has held the reins of power for twenty nine years. But it was the last phase of military dictatorship (1983 -1998) that altered the socio-political and economic landscape of Nigeria. As noted in a recent article, the deterioration currently experienced in the health sector is directly attributable to long years of kleptocratic repressive military dictatorship and widespread corruption and mismanagement of that era. A report released by the United Nations (UN) shortly before democracy was restored came to the same conclusion, implicating the military as being non-responsive to the deficiencies and continued rot of the health system. This rot is evident in a patchwork of decrepit public health infrastructure strewn across the country, most of which are severely understaffed and suffer extreme shortages of even the most basic equipment and medicine. Even in spotty instances where medical treatment and consultation are available, escalated cost means that millions are effectively shut out of the system. Bleak picture, indeed, but to a large extent, these observations are fairly accurate depictions of the conditions in Nigeria.

With the demise of military dictatorship in 1999 came new expectations and rekindled hope for a change in status quo. In response, or so it seems, the democratically-elected administration introduced several innovative policy initiatives, some of which are presently being pursued at different tiers of government. These initiatives aim to restructure and revamp the health system and, concomitantly, realize the goals of the recently revised National Health Policy and other health programmes, including the health-related benchmarks of the Millennium Development Goals (MDGs). Although the process has been far from perfect, the development and implementation of these programmes represent a significant departure from the errors and deficiencies of the past, at least in terms of openness and greater public participation.

Better health care is a primary human need, According to the World Health Organization (WHO, 2005), fifty percent of economic growth differentials between developed and developing nation is attributable to ill-health and low life expectancy. Developed countries spend a high proportion of their Gross Domestic Product (GDP) on Health Care because they believe that their resident health can serve as a major driver for economic activities and

development . To this end, Governments in Nigeria over the years have been making frantic efforts at ensuring that there is an increase in the level of public expenditure on health. In 1970, recurrent expenditure on health was N12.48 million. This figure rose astronomically to N52.78 million and N132.02 million in 1980 and 1985 respectively. This trend continues as the expenditure rose steadily form 575.3 million in 1989 to N68.20millions 1991 and further

to 72290.07 million and 98.200 million in 2007 and 2008 respectively. The aforementioned scenario clearly underscores the fact that health care expenditure in Nigeria has been on the increase over the years.

However, in spite of all these increase, much impact has not been made in the area of reduction of infant, under five and maternal mortalities since 1970. For instance, the Nigeria's rate of infant mortality (91 per 1000 live births) is among the highest in the world,

and the immunization coverage has dropped below thirty percent while the mortality rate for children under age five is 192 deaths per one thousand. By year 2007, it was reported that more than one hundred and thirty four thousand women died from pregnancy complications. In addition, the life expectancy ratio on the average has been on the decline over the study period. It should however be noted that despite the increase in government

expenditure in health care in Nigeria, the contribution of this to health is still marginally low whereas the extent and magnitude of its impact on economic growth is undetermined.

The interactions between health care expenditure and economic growth have received a lot of attention of researchers. Baldacci (2004) explore the role played by health expenditures. He constructed a panel data set for one hundred and twenty developing countries form 1975-2000 and found that spending on health within a period of time affects growth within that same period while lagged health expenditures appear to have no effect on growth. He inferred from this result that the direct effect of health expenditure on growth is a flow and not a stock effect. Bloom et al (2004) estimate a production function of aggregate economic growth as a function of capital stock, labour and human capital (education, experience and health). Their main result is that health has positive, statistically significant effects on economic growth. They however, do not consider how health is created.

Olaniyi and Adams (2000) descriptively analysed the adequacy of the levels and composition of public expenditures and conclude that education and health expenditures have faced lesser cuts than external debt services and defence, but allocations to education and health sectors are inadequate when related to the benchmark and the performance of other countries.


Education and health are the two most important characteristics of human capital. Their economic value lies in the effects they have on productivity: both education and health make individuals more productive. Education and health have a considerable impact on individual well-being, as well. The wealth of nations is to a large extent determined by the educational attainment and the health status of its population. According to the 2003 Human Development Report, "Education, health, nutrition and water and sanitation complement each other, with investments in any one contributing to better outcomes in the others" (UN, 2003, p. 85).

The positive association between education and health can be partly attributed to differences in income between countries. Health and prosperity are positively related. For

Example, Behrman and Rosen Zweig (2004) show that there is a strong negative association between the log of purchasing power parity (adjusted by GDP per worker) and the percentage of low birth weight babies. Low income countries have fewer resources to spend on publicly financed education and health care. Most individuals in low income countries also do not have the means to purchase education and health care themselves. On the other hand, investing in education and health provide the way out of poverty and are necessary conditions for increasing standards of living.

There are three potential explanations for the positive relation between education and health:

1) A better health enables one to invest more in education;

2) Common factors - such as genetic endowment, social background or time preferences - affect health and education in a similar way;

3) Education leads to a better health.

Education affects health, but investments in health and education also have some common attributes, as argued by Theodore Schultz in his seminal paper "Investment in Human Capital":

Education as well as health expenditures are both consumption and investment. Returns to investments in education and health are uncertain. There are third-party effects involved in both education and health. And the involvement of the public sector in the provision of education and health care is large.


Following the many years of military rule in Nigeria, the present government on assumption of office was faced with an array of complex, social, economic and political problems. These problems include pervasive poverty and wide spread unemployment, deterioration of government institutions, wide spread corruption, religion and ethnic violence, high crime rate and general feeling of insecurity.

In relation to education development, the constraints include low enrollment ratio, owing to economic, demographic, socio-cultural and religious factors; declining educational expenditure as a ratio of total government expenditure, policy inconsistencies; low level of instructional materials, manpower, physical infrastructures and average number of years of schooling completed per student at each level of education, power remuneration, poor conditions of services, incessant strikes etc.

In relation to health development, one the constraints is child heath; despite ratifications of the major international treaties on the rights of the child and the enactment of a child-centered domestic legislation in 2003 - the Child Rights Act - available data paints a depressing picture. According to WHO, Nigeria is among five countries that contribute 50% of the annual global mortality among infants and children under five years of age. Poverty, poor health status of mothers, high prevalence of malaria, pneumonia, measles, diarrhoea, HIV/AIDS, malnutrition and inadequate immunization coverage in the country are blamed for most of these deaths. Nigeria has an abysmal infant mortality rate (IMR), reported to be 85 and 195 deaths per 1000 live births in 1990 and 1995 respectively.In 2005, the figure stood at 101108 but slightly declined to 97 the following year. Worse still, Nigeria was among twelve countries identified in a recent report by the African Development Bank(ADB) as regressing from, and in danger of not, meeting the 2015 MDG of reducing infant mortality by two-thirds. IMR was found to be higher in rural communities than in urban areas, and this was attributed to disparity in access to health care, as health facilities are more readily available to urban residents than rural dwellers. Current efforts at combating morbidity and mortality among children center on expanded immunization programmes. Other constraints are: inadequate infrastructure and poor compensation packages, emigration of physicians and other medical professionals to other countries in search of better fulfilling and lucrative positions.

Also, human capital challenges can possibly be traceable to the much reported corruption and misappropriation of public funds (Transparency International, 2011) allocated for capital projects such as the installation of educational and health infrastructure in Nigeria. As at 2010, Nigeria scored 2.4 out of 10 in terms of transparency and the country made a position of 134 out of 178 (Transparency International, 2010).

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