How Investment in Human Capital Can Spur Growth

Increased human capital development has the potential to drive permanent increase in the growth rate of the Gross Domestic Product (GDP) of any economy through increased innovation and technological progress, a report has stated.

According to the latest economic bulletin of the Financial Derivatives Company Limited, countries like Singapore, and South Korea, have continued to experience an upsurge in their economic growth due to massive investments in their educational sectors.

It stressed that no country committed to improving its economy can afford to rank so badly in terms of educating its population. The report pointed out that Nigeria’s experience with human capital investment remains lack lustre. Conversely, in Nigeria, public expenditure in education has remained substantially below the United Nations Education, Scientific and Cultural Organization (UNESCO) recommendation that 15 per cent to 20 per cent of the national budget should be allocated toward health and education. The 2017 budget invested six per cent in education, way off the UNESCO’s benchmark.

The country’s economic renewal efforts have not fared much better when it comes to human capital, despite its enormous young labour force. The poor investments in human capital are reflected in Nigeria’s ranking near the bottom of the World Economic Forum’s Global Human Capital Report.

The report, which ranks 130 countries on how well they are developing and deploying their talent and evaluates levels of education, skills and employment, ranked Nigeria 114 in its 2017 report6.

“Focusing on agriculture as an example, Nigeria’s efforts primarily leveraged capital accumulation as a means of diversification from oil exports. “Strategies such as the National Economic Empowerment and Development Strategy (NEEDS) and the Transformation Agenda have been adopted to boost growth in the economy. “The NEEDS strategy involves employment creation, wealth creation, poverty reduction and value reorientation. “With NEEDS the government realised the need to develop entrepreneurial skills and SMEs. The focus, however, was on capital support, not skill development,” it stated. Hence, it noted that the 2004 consolidation in the financial sector to provide cheap loans for the private sector.

In a similar vein, the Transformation Agenda aimed at a hunger-free Nigeria through an agricultural sector that drives income growth, accelerates achievement of food and nutritional security, generates employment and transforms Nigeria into a leading player in global food markets to grow wealth for millions of farmers. “Here again the government provided low interest loans and capital finance for the agricultural sector, and again it ignored intensive training of the labour force employed by the agriculture sector.

“As these policies invested little in education and training, they failed to address the largely unskilled labour force. Hence, agricultural productivity remained subdued. “The low productivity in the agricultural sector ensues from the use of obsolete farming techniques and equipment despite the government effort to enhance capital availability (e.g. equipment).

“This is evidenced by farms that still use manual labour despite the machineries they possess. In this case training the workers in the specific skills