Education Financing and Human Capital Development: Empirical Evidence from Nigeria
Abstract
The study empirically examined the effect of education financing mechanisms on human capital development in Nigeria from 2000 to 2022. Using an ex post facto research design, secondary time-series data were sourced from the UNDP, the World Bank, the CBN, TETFund, and PTDF. Specifically, two models were specified: Model 1 (Human Development Index, HDI) and Model 2 (Per Capita Income, PCI), as functions of Government Budgetary Allocation to Education (GBAE), Education Trust Fund (ETF), Petroleum Technology Development Fund (PTDF), and Broad-Based Grant (BBG). The Autoregressive Distributed Lag (ARDL) bounds testing approach was employed alongside the Error Correction Model (ECM) to estimate long-run and short-run relationships. The ARDL bounds test confirmed cointegration in both models. In the long run, ETF had the largest positive and statistically significant effect on HDI (β = 0.0081, p < 0.01) and PCI (β = 0.072, p < 0.01). GBAE also significantly improved HDI (β = 0.0042, p < 0.05) and PCI (β = 0.031, p < 0.05). PTDF was marginally significant for HDI but not for PCI, whereas BBG was insignificant in both models. The ECM coefficients (-0.312 and -0.285) indicated convergence to equilibrium at about 30% per year. Overall, education trust funds (ETFs) are more effective than traditional budgetary allocations or donor grants in enhancing human capital. The study therefore recommended that the federal government of Nigeria should expand the ETF model, condition GBAE releases on performance, reform PTDF, and consolidate broad-based grants.