Strategic Investment in Education: Implications for Human Capital Formation in Nigeria
Abstract
This study examines the implications of strategic investment in education for human capital formation in Nigeria, with complementary attention to health financing and macroeconomic stability. Drawing on human capital theory, the study specifies human capital formation proxied by the Human Capital Index (HCI) as a function of disaggregated public spending and control variables. Using annual time-series data for Nigeria (1990–2024) sourced from the Central Bank of Nigeria Statistical Bulletin, World Development Indicators, and UNDP Human Development Reports, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to capture both short-run dynamics and long-run equilibrium relationships. Diagnostic tests for stationarity, cointegration, serial correlation, and stability were conducted to ensure robustness. The findings showed that recurrent expenditure on education and health, alongside rising per capita income, improves HCI, whereas capital expenditure on education yields weaker effects where implementation inefficiencies persist, and inflation erodes real human capital gains. The study therefore recommended prioritizing efficient recurrent funding and primary healthcare to protect the real value of educational investments.