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Human Capital Development and Poverty Reduction in Nigeria

Dennis Brown Ewubare

Department of Agricultural and Applied Economics, Rivers State University, Port Harcourt, Nigeria,, +234-8037068750

ThankGod Mark

Department of Agricultural and Applied Economics, Rivers State University, Port Harcourt, Nigeria.


This paper analyzed the link between human capital development and poverty reduction in Nigeria between 1990 and 2016. In specific terms, the effects of primary and secondary schools enrolments, as well as public and private healthcare expenditures on poverty level, were examined. The data required for the analysis were culled from the National Bureau of Statistics and World Bank World Development Indicators. Fully Modified Least Squares and Granger causality test in addition to ADF unit root and Johansen-Juselius cointegration tests were employed as data analysis techniques. It is evident from the unit test result that the variables are mixed integrated with the order of integration ranging from zero to one. The trace and Max-Eigen statistics for cointegration tests indicate that two cointegrating equations exist in the model. The implication of this finding is that underlying measures of human capital development and poverty level have long run relationship. The cointegrating regression result shows that primary school enrolments, secondary school enrolments, and public healthcare expenditure are significantly related to poverty level while private healthcare spending does not exert significant influence on poverty level. A percentage increase in primary school enrolment reduces poverty by 0.697 percent while a percentage increase in secondary school enrolment contracts poverty by 0.84 percent. Similarly, a percentage increase in public healthcare spending, on the average, reduces poverty by 16.63 percent. This is indicative that public sector spending in the health sector is robust in reducing the level and depth of poverty in Nigeria. The Granger causality test results also show that joint causality runs from the explanatory variables to the poverty level. Given this finding, it is recommended among others that Policymakers should ensure that poverty reduction strategy in Nigeria provides for increased access to education through gross primary and secondary school enrolments and public healthcare

1.1 Introduction

Human capital development has remained at the forefront of strategies for reducing poverty in both low and middle-income countries. This is based on lessons from developed economies where their success, to a great extent, is linked to increased and sustained investment in human resources. Broad-based growth in the forms of social, political and economic transformations is driven by the development of human capital (Harbison and Charles, 1964 as cited in Allahdadi and Aref, 2011). Numerous indicators of human capital development such as quality and improved access to education, healthcare, and nutrition are crucial for alleviating poverty – either headcount or multidimensional. It is important to note that the quality of education and healthcare delivery have remained at the center of human capital development in low and relatively medium-income countries.

Raja (2000) observed that the centrality of education in human capital development by identifying it as the first step in the process of development. This is because of the dual roles of increasing productivity and reducing poverty education is perceived to play in any economy.

Pervez (2014) opined that education provides a roadmap for building human capacity and facilitates sustained growth through knowledge and skills. The importance of education in enhancing human capital is further elaborated by Kim and Terada-Hagiwaa (2010) as they claimed that well-educated working population facilitates the adoption of new technology and production methods that are crucial for reducing high trace of poverty.

Like other richly blessed members of the Organization of Petroleum Exporting Countries (OPEC), Nigeria has shown a very high trace of poverty and low human development index. The Human Development Report (UNDP, 2003) indicates that Nigeria is one of the poorest among the poor countries of the world. Again, the UNDP (2008) reveals that Nigeria is ranked 154 out of the 179 countries in terms of human development. It is equally ranked 30th in gender-related development index (Chikelu, 2016). These figures point to the fact that human resource development in Nigeria is quite low and has not improved in recent time. Although successive governments in Nigeria have adopted various strategies and pursued numerous programmes to improve the quality of human resources with a view to reducing the growing levels of poverty, the associated outcomes have not been very impressive considering the growing incidences of poverty in both urban and rural areas. This has provoked several empirical investigations to gain more information on the human resource development-poverty relationship with controversies surrounding the outcomes of the various empirical investigations. In the light of the foregoing, this paper explored the implications of human capital development on poverty reduction drawing an empirical lesson from Nigeria between 1990 and 2016.

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