IMPACT OF GOVERNMENT EXPENDITURE ON HUMAN CAPITAL

DEVELOPMENT
(1990-2022)

A research project Submitted to the

Department of Economics and Development Studies,
Faculty of Social Sciences, Federal University Dutsin-ma.
In partial fulfilment of the requirements for the award of the Degree of
Bachelor of Science (B.Sc) in Economics.

BY

IROCHE, UDOCHUKWU HEZEKIAH

SOC/2019/7924

OCTOBER, 2023

i
 CERTIFICATION

This project titled “Impact of Government Expenditure on Human Capital Development (1990-

2022)”, by IROCHE, UDOCHUKWU HEZEKIAH with Matriculation No. SOC/2019/7924 has

been approved for its contribution to Knowledge and met the requirements for the award of the

Bachelor of Science (B.Sc) Degree Economics in the Department of Economics & Development

Studies of Federal University, Dutsin-ma, Katsina State.

Dr. Gyung Yerima ____________________________

Project Supervisor Signature and Date

Dr. Saifullahi Sani Ibrahim _______________________________

Head of Department Signature and Date

Prof. Aliyu Rafindadi Sanusi ________________________________

External Examiner Signature and Date

ii
 DECLARATION

I hereby declare that this project work titled “Impact of Government Expenditure on Human

Capital Development (1990-2022)”, has been written by me under the supervision Dr. Gyung No

part of this work has been submitted to any other institution for the award of a degree. All borrowed

ideas have been duly acknowledged in the text and a list of references provided.

Iroche, Udochukwu Hezekiah ____________________

SOC/2019/7924 Signature and date

iii
 DEDICATION

I dedicate this project to GOD ALMIGHTY and to my beloved Parent MR Iroche, Onyenonachi

Lenz and MRS Iroche, Charity Chioma.

iv
 ACKNOWLEDGEMENT

My eternal gratitude goes to the ALMIGHTY GOD for HIS love, mercy and direction

throughout my life and most especially for being with me in accomplishing this great success.

I am immensely grateful to my supervisor Dr Gyung Yerima. For his time, attention,

guidance, encouragement and patience to direct, and edit my research project. May God continue

to take him to greater heights.

Words alone cannot be enough to thank my lovely parents Mr. and Mrs. Lenz and Chioma

Iroche for their continuous financial, spiritual and moral supports. To my wonderful siblings

Elizabeth, Victoria and Esther. I say thank you. I am also grateful to them for their constant show

of love, care and encouragement during the cause of this work. To my beloved Partner Temitope

Oluyomo, God Bless you greatly.

I also wish to thank the following lecturers in persons of Dr. Richard Ikyarem and Dr.

Martins Iyoboyi for their impactful teaching methods in school, may God bless you all endlessly.

I cannot forget to thank my friends; Jael, Tayo, Kings, Morah, Beardedguy, Chris, Orji,

Boilee, Nura, Dickson, 2pac, and Salisu for their love and support all through my undergraduate

program, may God continue to bless you all and to all my course mates’ class of 2022, you are all

appreciated.

v
TABLE OF CONTENTS

Cover Page _________________________________________________________________ i

Certification ________________________________________________________________ ii

Declarations ________________________________________________________________ iii

Dedication __________________________________________________________________ iv

Acknowledgement ____________________________________________________________ v

Table of Contents ____________________________________________________________ vi

Abstract ___________________________________________________________________ viii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study ____________________________________________________ 1

1.2 Statement of Research Problem _______________________________________________ 3

1.3 Research Questions _________________________________________________________ 4

1.4 Objectives of Study _________________________________________________________ 5

1.5 Research Hypothesis ________________________________________________________ 5

1.6 Justification of the Study _____________________________________________________ 5

1.7 Scope of the Research _______________________________________________________ 6

CHAPTER TWO: LITERATURE REVIEW

2.1 Conceptual Literature ________________________________________________________ 7

2.1.1 Human Capital Development ________________________________________________ 7

2.1.2 Government Expenditure on Education ________________________________________ 8

2.1.3 An Overview of Educational Development in Nigeria _____________________________ 8

2.1.4 Current Challenges Facing Nigeria Educational Sector ___________________________ 12

2.1.5 Nigeria Current Human Capital Development __________________________________ 14

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2.1.6 Reviewing Concept in Nigeria (Trend and Pattern Analysis) ______________________ 16

2.2 Theoretical Literature _______________________________________________________ 19

2.2.1 Human Capital Theory ____________________________________________________ 19

2.2.2 Musgrave’s Public Expenditure Theory _______________________________________ 19

2.2.3 Wagner’s Public Expenditure Theory _________________________________________ 20

2.3 Empirical Literature ________________________________________________________ 20

2.4 Missing Gap ______________________________________________________________ 26

CHAPTER THREE: METHODOLOGY

3.1 Theoretical Framework ___________________________________________________ 27

3.2 Model Specification ______________________________________________________ 28

3.3 Model Estimation Procedure _______________________________________________ 29

3.4 Techniques of Data Analysis _______________________________________________ 29

3.4.1 Pre-estimation Test _____________________________________________________ 29

3.4.2 Estimation Test ________________________________________________________ 30

3.4.3 Post Estimation Test ____________________________________________________ 30

3.5 Sources and Description of Variables ________________________________________ 31

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Descriptive Statistics _____________________________________________________ 33

4.1.1 Trend of Variables _____________________________________________________ 34

4.2 Data Analysis ___________________________________________________________ 35

4.2.1 Unit Root Test Results ____________________________________________________35

4.2.2 Test for Co-Integration ____________________________________________________ 35

4.3 Result Interpretations and Findings ____________________________________________ 37

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4.3.1 Post-estimation Test ______________________________________________________ 38

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings _____________________________________________________ 40

5.2 Conclusion ______________________________________________________________ 40

5.3 Recommendations ________________________________________________________ 41

References

Appendix I

Appendix II

Appendix III

viii
 ABSTRACT

This study examined and analyzed the impact of government expenditure on human capital

development in Nigeria, using time series data of 33 years spanning 1990 to 2022, data utilized

for the study were extracted from secondary sources i.e. journals and publications, CBN, WDI and

NBS. The Autoregressive distributed lag technique was used to estimate the parameters of the

model. Empirical results shows that Government expenditure on education (GEXE) exhibits a

negative relationship with the primary school enrollment rate and that this relationship is not

statistically significant. This might be due to so many factors with inefficient allocation of

resources to education being one of it. However, further research is recommended to explore the

nuances of government expenditure on education and identify specific areas where investment can

yield the most significant improvements in human capital development. It was also found that GDP

per capita had a positive and significant relationship with primary school enrollment rate. This

implies that economic stabilization through higher GDP per capita and moderate inflation rate

which is one of Musgrave’s principles serves as a corner stone for human capital development.

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Sustainable economic development is far from being achieved in a nation that makes no

meaningful investment in its human capital. Investment in human capital is essential for promoting

economic growth and development. Every country strives to have a skilled and knowledgeable

labour force, and government spending on human capital enables citizens to have better lives and

to effectively contribute to economic development and prosperity. Development is mostly

influenced by aspects related to health and education. The improvement of human capital has been

identified by economists to be a key prerequisite for a country’s growth and development.

The increase in government expenditure on human capital development can lead to a

positive growth in the Nigerian economy. Human capital development can contribute to improved

growth if government expenditure is channeled to this sector. According to Bassey et al. (2022),

education enhances people’s ability to contribute more to the growth process and improve their

level of productivity. Education guarantees people to live a longer and healthier life, because

knowledgeable persons improve human capital development.

It has been emphasized that the quality and quantity of human resources, rather than natural

resources, endowments, and the stock of physical capital, is what accounts for the disparities in

the level of socioeconomic development among countries Oladeji and Adebayo (1996), assert that

human capital resources are an important factor in the expansion of an economy and should be

developed. They serve as both means and, more crucially, ends that must be preserved in order to

advance economic growth.

1
 The Human Development Index is a more appropriate approach for measuring a country's

economic development. The United Nations developed this method in 1990 as it could not depend

only on Gross National Income (GNI). It includes aspects of what a developed country should

have, such as health, education, and standard of living. Although it does not consider factors such

as inequalities, security, and poverty. However, it is still vital as it comprises factors that stimulate

economic growth. Educational status is a more suitable method for showing the correlation

between Human capital and Economic growth (Ogundari and Awokuse 2018). According to the

annual Human development report, 2021/22 Nigeria has an HDI of 0.535, which is very poor.

Since gaining independence in 1960, Nigeria has been involved in planning the nation's

development. Yet, in order to achieve rapid socioeconomic advancement, the policy has placed a

strong emphasis on the acquisition of physical or material capital at the expense of human capital.

The pace of development in the nation significantly slowed down due to the earlier development

methods, which mostly neglected the social or human component of development. Expenditure

towards human capital development in Nigeria in recent years has been unpromising because

Nigeria is blessed with a youthful population and vast natural resources, which are yet to be

utilized.

It is proven that investment in education plays a vital role in the productivity of any country.

From time immemorial, education has been a vital ingredient that fuels productivity. In recent

times, it has aided in the development of improved and skilled workers. However, it has been

globally accepted that education promotes human capital development, boosten the productivity

of an economy and improves the standard of living of an economy, Uruakpa et al.(2022).

Human capital can be a tool for fostering growth and progress, but it can also be ruined,

abused, and wasted. All acts of violence are examples of human capital directed towards self-

2
destruction as well as other forms of capital. Human capital cannot be developed or utilized

successfully if there is lack of education or even education promotes incorrect ideologies.

Therefore, human capital development can only occur when sufficient investment in the form of

quality education is made towards it; otherwise, they deteriorate over time if left unused Šlaus and

Jacobs (2011). In Nigeria, service postings and teacher appointments are now based on who knows

whom, with individuals with "connections" being posted to urban public schools and those without

connections to rural locations. Poor infrastructure, bad road networks, inadequate social services,

and security concerns in rural locations lead to teachers avoiding classes, resulting in students only

receiving partial education, worse than illiteracy Afolayan (2020).

According to Todaro (2000), education promotes both economic growth and increases

empowerment. This enables individuals to do things rightly and responsibly and opens them to

life-changing opportunities. This in turn translates to an increase in an individual's welfare and an

increase in the economic development and sustainability in Nigeria.

1.2 Statement of Research Problem

Human resource development is crucial for economic sustainability and has gained

renewed attention in recent years. However, Nigeria's public spending on education is typically

low, with the national budgetary allocation for education still below the 15-20% of the UNESCO

commitment to dedicate to education in 2015. The Nigerian government's budgetary allocation for

education in 2021 and 2022 was N742.5 billion (5.39%) out of N13.08 trillion total budget and

N923.79 (5.68%) out of N17.13 trillion total budget respectively. This indicates a lack of interest

in the educational sector.

The country's educational possibilities and standards are continuing to erode due to poor

investment in education. Inadequate funding has resulted in a decline in the standard of education

3
in Nigeria, leading to a lack of adequate infrastructure, such as standard classrooms, laboratories,

and libraries. The use of outdated curriculum has also hindered Nigerians from meeting the rapid

changing society, leading to unemployment of graduates. Examination malpractice undermines

the credibility of examinations and devalues the quality of graduates produced by institutions.

Corruption in Nigeria affects people more than corruption in other sectors, both in rural

and urban areas, Transparency International (2004). Corruption in education has negatively

affected human capital development, resulting in a decline in morality and the value of education.

Admissions and educational certificates are purchased in Nigeria, stifling research and

development, producing unskilled workers, and hampered the development of human capital.

Educational policies in Nigeria, such as Universal Primary Education (UPE), Universal

Basic Education (UBE), and the 3-3 national educational policy, are affected by these challenges,

including the lack of qualified teaching staff and motivations. Schools have also experienced

closures due to strikes over the non-payment of salaries.

This research is conducted to reexamine the impact of government expenditure on human

capital development between years 1990-2022. It aims to investigate the root cause of the

challenges faced by the educational sector and its repercussions on human capital development.

1.3 Research Questions

In the light of the problem, this study seeks to give answers to the following questions;

i. What impact does government expenditure on education have on primary school

enrollment rates in Nigeria?

ii. How does GDP per capita influence the effectiveness of human capital investment in

Nigeria?

4
1.4 Objectives of the Study

The primary goal of this study is to examine the impact of government spending on human

capital development and its spillover on economic growth and development in the Nigerian

economy.

It specifically aims at:

i. To investigate the role of government expenditure on education in influencing primary

school enrollment rates.

ii. To access the influence of GDP per capita on human capital outcomes.

1.5 Research Hypothesis

H01: There is no significant relationship between government expenditure on human capital

development.

H02: GDP per capita has no significant impact on human capital outcomes

1.6 Justification of the Study

Economic sustainability is strongly influenced by the development of human resources,

according to studies. By producing workers that are more capable and raising healthier, educated

individuals, it improves the labor force of an economy. In addition to that, it raises their standards

of living. This research helps to improve the understanding of the relationship between human

capital and economic sustainability in the Nigerian economy. The findings of this study will

primarily benefit economies looking to improve their economic status through extensive

investment and strict inspection of programs intended to improve their human resources.

Technology advancement is a key component that boosts growth and improves productivity, and

people with strong, healthy minds can only accomplish it.

5
1.7 Scope of the Study

The time covered by this study, which runs from 1990 to 2022, is likewise marked by a

time of globalization, rapid technological advancement, and economic reforms. The focus will be

on government spending on education as well as human capital investment.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Literature

2.1.1 Human Capital Development

Human capital development is a critical factor in economic growth and development, as it

helps to enhance the productivity and efficiency of the labor force. Adam Smith (1776) is credited

with first introducing the idea of human capital in his book “An Inquiry into the Nature and Causes

of the Wealth of Nations” where He expressed the following in his fourth definition of capital:

"The acquisition of abilities during school, study, or apprenticeship, involves a real expense, which

is capital in a person. He and society both benefit from their talents as part of their fortune.

Romele (2016) defined human capital as the entirety of knowledge and skills which have

been accumulated throughout life, through education, training and work experience and which

influence labour productivity. Countries that invest in education and training tend to have higher

levels of economic growth and development than those that do not. Education and training help to

develop the skills and abilities of individuals, which are essential for innovation, technological

advancement, and productivity improvements. It has been identified by previous studies that the

difference in the productivity levels of different countries lies in the total human capital develop

and reserved. Thus, the wealth of a nation is not based on its total human resources but based on

the total human resources that has been developed. Therefore a nation can be blessed with a large

labour force, but when majority are unskilled i.e. not invested in, it can’t be productive. Education

is a cornerstone of a nation’s development capability, contributing to its growth, productivity, and

stability while improving the overall quality of life its citizens.

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2.1.2 Government Expenditure on Education

Government expenditure or public expenditure refers to the outflow of resources from the

government to various sectors of the economy. It encompasses both current expenditure, which

includes salaries, wages, subsidies, maintenance, and administrative costs, and capital expenditure,

which includes investments in infrastructure, equipment, and long-term assets. Public expenditure

is usually influenced by population, demographics, inflation, public demand, technological

changes and innovation and also the need to address natural disasters. Lucas (1988).

Government expenditure in this context refers to the spending by the government

channeled towards human capital development. It plays a vital role by providing the necessary

resources needed to enhance human capital development. Government expenditure on human

capital development is crucial for achieving inclusive and sustainable development. Public

expenditure channeled toward human capital development is crucial as it provides equal

opportunities for education, training and skill development, irrespective of individuals' socio-

economic backgrounds and this in turn leads to increased productivity and innovation, fostering

economic growth and poverty reduction.

2.1.3 An Overview of Educational development in Nigeria

The Nigerian educational system has undergone a remarkable transformation throughout

its history, reflecting the country's societal, political, and economic developments. From its humble

beginnings in the pre-colonial era to the challenges faced during colonization and the subsequent

post-independence period, Nigeria's education system has evolved in response to changing needs,

aspirations, and global trends. By understanding this historical journey, we can gain insights into

the current state of education in Nigeria and explore potential avenues for future development.

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 Education in pre-colonial Nigeria was primarily rooted in indigenous traditions and

practices. Knowledge was transmitted orally through storytelling, apprenticeships, and

community-based learning. The education system focused on practical skills, cultural values, and

the preparation of individuals for their roles within the community. Elders, known as "wise men,"

played a crucial role in imparting knowledge and wisdom to the younger generation. Education

was holistic, incorporating physical, social, and moral aspects of development. The arrival of the

British colonial administration in Nigeria brought significant changes to the educational landscape.

The colonial authorities introduced a formal education system, initially aimed at training locals as

clerks and interpreters to serve the colonial administration. Christian missionaries played a vital

role in establishing schools, especially in the southern regions of Nigeria. However, the curriculum

was largely Eurocentric, emphasizing the English language, mathematics, and religious studies,

while marginalizing indigenous languages and cultures. The education system was segregated,

with separate schools for Nigerians and European expatriates, perpetuating social and economic

inequalities. The limited access to education for the majority of Nigerians fueled a sense of

injustice and sparked resistance movements, such as the Aba Women's Riots of 1929. Nigerian

intellectuals and nationalists, such as Nnamdi Azikiwe and Obafemi Awolowo, began advocating

for educational reforms and the empowerment of Nigerians through education.

Since Nigeria gained her independence in 1960, efforts to revitalize the educational system

has failed and not always worked as people wanted it to. Education reform dates back to the

precolonial era, where comprehensive educational policies such as the Universal primary

Education (UPE) which was introduced in 1955 by the Western Regional Government which made

education free throughout the region. In 1957, the Eastern government followed suit creating a

UPE for the Eastern region and then the 1976 UPE national program Edho (2009). In 1969, the 6-

9
3-3-4 system was introduced, restructuring the educational framework into six years of primary

education, three years of junior secondary and senior secondary education and four years of tertiary

education.

During the first civilian rule which took place in 1999, the Universal Basic Education

(UBE) was introduced and implemented. The UBE scheme was just like that of the UPE which

was tried during the 1950s and 1970s. Aluede (2006), emphasized the need for the Federal

Government's involvement in the UBE scheme for national integration and ensuring children learn

society's culture. He emphasized the importance of laying a solid foundation for scientific thinking,

character and moral training, attitude development, and adaptability to changing environments, all

of which are crucial for achieving national integration. The Universal Basic Education (UBE)

scheme, despite federal and state government involvement, has faced significant challenges as the

UPE due to inadequate planning and implementation.

The emergence of Private Universities into the educational system was a new phenomenon.

For the first time, private entities were allowed to own universities during the second republic in

1979. However this scheme was short-lived the military rule took over the civilian rule in 1983

hence, the program was shutdown. However, since then for over twenty years the educational

system especially at university level has been unable to accommodate the large numbers of

students seeking admissions in to the university. Alase (2017). Reasons given were stemmed from

the huge teacher-student ratio by Nigerian Union of Teachers NUC (2005) and also lack resources

needed to ensure quality education. Ejiro-Akpotu and Akpochufo (2009). Furthermore,

overcrowding in classes worsened and led to examination malpractices; poor and inadequate

standards in teaching at the institutions; and the never-ending strikes by university workers

intensified the problems. Alase (2017).

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 Table 1: Strike events embarked on by Nigerian Universities

Year Time in strike Year Time in strike

5 months 2009 4 months

1999
3 months 2010 5 months
2001
2 weeks 2011 59 days
2002
6 months 2013 5 months
2003
2 weeks 2017 1 month
2005
3 days 2018 3 months
2006
3 months 2020 9 months
2007
1 week 2022 8 months
2008

Source: punch newspaper publications, May 2022. Author’s compilation.

There had been around 16 strikes throughout a 23-year span. Total strikes account for 238

weeks, according to data shown in table 1, resulting in wasted time and a massive cost to the

system. According to an article by tribuneonlineng.com (2020), public universities may have lost

₦1.5 trillion (approximately $1.579 million) as a result of ASUU's incessant strike events since

1999. All of the aforementioned factors contribute to Nigerian educational institutions' inability to

financially and structurally accommodate students moving from high schools to universities.

Corruption, on the other hand, is an additional difficulty; embezzling funds needed to provide

adequate structures for the university makes it impossible to admit huge numbers of students

leaving high schools for the university.

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 Adult education is a new educational event in Nigeria unlike in other countries. Although

Omolewa (1981) notes that adult education was first implemented in 1944 but due to poor

implementation, it was not successive. In recent times, adult education is being embraced with the

licensing of private learning institutions, with more encouragement this scheme can be success but

this program faces this issue. According to (Alase 2017), the government has not created the

environments where adult education is encouraged. Adult education, according to Onyenemezu

(2012), contributes to global peace and harmony by dissolving misconceptions, lowering

prejudice, and increasing sophistication and polish in selected vocations. As the globe becomes

more like a village, adult education can help to reduce prejudice and promote global harmony.

In recent years, education in Nigeria has received notable transformations. Globalization

has transformed the way people interact with each other; it has revolutionized the movement of

resources; capital and labor to places around the world that needed it the most (Alase 2017). As a

result of this event, African countries such as Nigeria have found it somewhat easier to reassess

their educational and economic priorities and objectives. It has also created a global space for

people of different background to interact and this interconnectivity through globalization has

made the education available to most people in remote area. For Example, People are now able to

take courses online as the National Open University of Nigeria (NOUN) as well as lots of other

online platforms, both home and abroad offers it.

2.1.4 Current Challenges Facing the Nigerian Educational Sector.

The educational sector in Nigeria continues to face several challenges that hinder its ability

to provide quality education and meet the needs of the population. Some of the current problems

in Nigeria's educational sector include:

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 i. Inadequate Funding: One of the major challenges is the insufficient funding allocated to

the educational sector. The budgetary allocation for education in Nigeria falls short of the

recommended benchmark set by international standards, leading to a lack of resources,

inadequate infrastructure, and a shortage of qualified teachers.

ii. Poor Infrastructure: Many schools in Nigeria lack basic infrastructure such as

classrooms, libraries, laboratories, and sanitation facilities. This hampers the learning

environment and makes it difficult to deliver quality education. Additionally, there is a

stark disparity in infrastructure between urban and rural areas, exacerbating educational

inequalities.

iii. Outdated Curriculum: The curriculum in Nigerian schools often fails to meet the needs

of a rapidly changing society and job market. There is a lack of emphasis on practical skills,

critical thinking, and entrepreneurship. The curriculum also inadequately addresses issues

such as technology integration, digital literacy, and vocational training, which are essential

for the 21st-century workforce.

iv. Examination Malpractice: Examination malpractice, including cheating, leakages of

question papers, and fraudulent practices, remains a significant problem in Nigeria's

educational system. This undermines the credibility of examinations and devalues the

quality of education.

v. Insufficient Educational Policies and Implementation: While Nigeria has various

educational policies and frameworks in place, there is often a lack of effective

implementation and monitoring mechanisms. This results in a gap between policy intent

and actual outcomes, preventing meaningful progress in addressing educational challenges.

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 vi. Security Concerns: In some parts of Nigeria, particularly in the northeastern region

affected by insurgency, security challenges pose a significant barrier to education. Schools

have been targeted, leading to the closure of educational institutions and the displacement

of students and teachers.

vii. Corruption: Corruption in the Nigerian educational system has had negative effects on its

human capital development, such as quality of education, inequality in access to education,

skills mismatch, and erosion of ethics and values. These, in turn, have led to a lack of

competent and skilled individuals, perpetuating social and economic disparities, and

hindered the development of human capital. It has also eroded ethical values and promoted

a culture of dishonesty, leading to brain drain, hindering human capital development, and

suppressing research and innovation.

2.1.5 Nigeria Current Human Capital Development

According to a new assessment by the United Nations Development Program (UNDP),

Nigeria, the largest economy in Africa, is placed 163rd out of 191 nations in the UN's Human

Development Index (HDI) as of 2022. This can be interpreted simply as meaning that Nigeria only

outperforms 28 other nations in terms of quantifiable human development indices (HDI), and

consequently, in terms of citizen quality of life. Economic performance (Gross Domestic Product

(GDP), Gross National Product (GNP), and per capita income), life expectancy, literacy rates,

water, nutrition, and sanitation conditions, health hazards, and technology dissemination and

application are the main criteria taken into account when ranking countries. It is generally

recognized that Nigeria's life expectancy is as low as 55.89 years (2023), that roughly two-thirds

of its citizens are poor and live on less than $1 per day, that the country is one of the most expensive

to operate an industry in due to subpar infrastructure, that the economy is still heavily dependent

14
on imports and a sector, that unemployment is at double-digit levels, that medical care is in its

infancy despite the fact that many of its citizens are key practitioners in the best health system

abroad and that confidence in its educational system which was once the best has eroded. It goes

on and on in this list. These signs of our beloved country's low human capital level are undeniable

proof of its low human capital status.

Government expenditures on education, which is vital for development over the years, have

been relatively low compared to the 15 – 20 per cent recommended by UNESCO for its member

states in 2015. For instance, in 2016, education got 7.9 per cent. This reduced to 6.1 per cent in

2017, and later increased by 7.1 percent in 2018. Allocation to the educational sector in nosedived

to 6.5 percent in 2020 and then 5.7 and 5.4 in 2021 and 2022 respectively (Thecable.ng 2023).

While the government has expressed a commitment to increasing investment in education, the

allocation as a percentage of the national budget remains relatively low compared to international

benchmarks. The challenge of limited funding has contributed to the deterioration of educational

facilities, shortage of qualified teachers, and a lack of educational resources.

Nigeria's current illiteracy rate according to data from 2022 is estimated to be 31%, which

indicates that out of a population of 220 million, over 76 million adults are illiterate. Nigeria’s

educational system still struggles with inadequate funding and also security issues. Terrorist

attacks on girl’s school has made guardians hesitant in educating their girls which has affected the

percentage of educated females. An addition to this also include the high fertility rate of adolescent

females, especially in the northern regions. This in turn contributes to lower education outcomes.

According to Vanguard (2023) and based on United Nations International Children's Emergency

Fund (UNICEF) report, Nigeria has a total out of school children of 18.5 million and 60% of them

are girls.

15
 In terms of human development index (HDI), which is the index used by the United nations

to measure the progress of an economy, Nigeria ranks 163rd out of 191 nations with an index of

0.534 in 2022. It is not news that Nigeria’s HDI ranks among the lowest. This is due to the

aforementioned factors, in addition includes poor social infrastructure, low access to educational

facilities, high mortality rate; currently 13.08% per 1000 inhabitant according to Statista (2021),

with a global hunger index of 27.3 which places Nigeria as the 103rd of 121 hungriest country as

at 2022. This suggests that Nigeria's human capital is significantly undeveloped. It must be

emphasized once again that human capital is the foundation of Nigeria's growth and must be

prioritized.

2.1.6 Reviewing the Concept in Nigeria (Trends and Pattern Analysis)

Members of the United Nations Educational, Scientific, and Cultural Organizations

(UNESCO) met in 2015 to agree on a proportion of their total yearly budget that developing

countries should allocate to public education. This agreed-upon percentage was 15 to 20%. The

budgetary figures represented below indicates that Nigeria allocation to education has fallen short

of the UNESCO standard. Thus, this study analyzes the educational budget between the years 2015

to 2023.

Table 2: Nigeria’s budget and allocation to the education sector from 2015 to 2023

Year Budget Education allocation Allocation to education

(₦) (₦) as % of total budget

2015 4,450,000,000,000 483,180,000,000 10.8

2016 6,060,000,000,000 480,280,000,000 7.9

2017 7,300,000,000,000 448,440,000,000 6.1

2018 9,200,000,000,000 651,230,000,000 7.1

16
 2019 8,830,000,000,000 754,530,000,000 8.4

2020 10,510,000,000,000 686,820,000,000 6.5

2021 13,590,000,000,000 742,520,000,000 5.7

2022 17,130,000,000,000 923,790,000,000 5.4

2023 21,830,000,000,000 1,790,000,000,000 8.2

Total 98,900,000,000,000 6,960,790,000,000

Mean 10,988,888,888,889 773,421,111,111 7.04

Source of Data: Dataphyte.com; Author’s computation

The data presented in table 2 indicated a total budget allocation of ₦6,960,790,000,000

(Six trillion, nine hundred and sixty billion, seven hundred and ninety million naira). This implies

that on an average only ₦773,421,111,111 (seven hundred and seventy-three billion, four hundred

and twenty-one million, one hundred and eleven thousand, one hundred and eleven naira) was

allocated to education between 2015 to 2023 (annually). Meanwhile the total budget estimated by

the Federal Government for this period stood at ₦98,900,000,000,000 (Nine-eight trillion, nine

hundred billion naira) with an annual average of ₦10,988,888,888,889 (Ten trillion, nine hundred

and eighty-eight billion, eight hundred and eighty-eight thousand, eight hundred and eighty-nine

naira). Results also indicates that 7.05 per cent of the nation’s budget each year (average) from

2015 to 2023 was allocated to education. This is far below the proposed 15 to 20 percent

recommended by UNESCO.

In specific terms, the result showed that 10.8% of Nigeria’s total budget was allocated in

2015, 7.9% in 2016 and 6.1% in 2017. The figures further indicates that 7.1%, 8.4% and 6.5%

were allocated to education in 2018, 2019 and 2020 respectively. Also 5.7%, 5.4% and 8.2% were

also were also made in 2021, 2022 and 2023 respectively. The highest allocated percent during

this period was in 2015 where 10.8% was allocated. The lowest allocation made to the educational

17
sector was 5.4% in 2022. However, all figures falls below the UNESCO recommendations. In

understanding the growth patterns, the trend graph is used as shown in figure one.

NIGERIA'S EDUCATIONAL BUDGET % (2014-2023)

10.8

8.4 8.2
7.9
7.1
6.5
6.1
5.7 5.4

2015 2016 2017 2018 2019 2020 2021 2022 2023

Figure 1: Trend graph showing Nigeria’s budget allocation to the educational sector as a

percentage of the total budget from 2015 – 2023.Source: Author’s Compilation ∙ Source: Author’s

computation

Figure 1 shows that the growth of educational allocation decreased by 2.9% between 2015

and 2016. In 2017, there was a 1.8% decrease from the previous year. However, educational

allocation increased by 1% in 2018. This gain sustained a 1.3% increase in 2019; however, it was

followed by a 1.9% and 0.8% decrease in 2020 and 2021, respectively. In 2022, there was another

0.3% decrease, followed by a 2.8% increase in 2023.

This pattern indicates that the Federal Government's allocation to education is unstable and

has been shaky over time. In the studies of other authors like Odigwe and Owan (2019), the

budgetary fluctuations has been systematic and even existed even before this period of study

(2014-2023). However, It was shown that the highest allocation was 10.8 (10.79 in actual figures).

Irrespective of that, all was below the recommendations of UNESCO.

18
2.2 Theoretical Literature and Models

Several theories have been developed since time immemorial to provide insight into the

nexus between government expenditure on human capital development. Economists generally

agree that quality human resources have a significant impact on the growth and development of an

economy. It is the quality and quantity of labor that determine production because it is a factor of

production. However, improvement in the quality of the labour force also leads to economic and

noneconomic outputs (ideas and decisions) which in turn has a significant impact on investment,

innovation, and other growth opportunities Roux (1994). Below are some economic growth

models propounded by several economists to conceptualize the factors that determine growth

based on human capital development.

2.2.1 Human Capital Theory

Human capital theory, founded four decades ago by Theodore, Schultz, Becker, and John

Mincer, suggests that investment in human capital depends on the costs of acquiring skills and

anticipated returns. Better-educated economies can lower human capital acquisition costs by

subsidizing education and training costs. This leads to a higher rate of returns on knowledge and

skills compared to less-advanced economies. Nations play a crucial role in creating advantages for

citizens by encouraging them to acquire substantial stocks of human capital. Human capital

eventually gains value in labor markets, and investment in human capital leads to an enhancement

in its value, ultimately yielding basic physical outputs.

2.2.2 Musgrave Public Expenditure Theory

Richard A. Musgrave’s public expenditure theory is a framework that outlines the three

branches of public finance used by the government to achieve economic and social objectives, they

include: allocation, distribution, and stabilization. The allocation function focuses on government

19
role in ensuring efficient resource allocation, while the distribution function addresses equity and

fairness in resource distribution. The stabilization function uses government spending to stabilize

the economy during economic downturns. Musgrave’s theory has implication for public policy,

including balancing efficiency and equity, correcting market failures and also supporting

government intervention through welfare programs through provision of education facilities.

Despite criticisms, Musgrave’s idea remain relevant, providing a theoretical framework for

government spending priorities, tax policies, and resources distribution.

2.2.3 Wagner Public Expenditure Theory

The Wagnerian theory of public expenditure, developed by German political economist

Adolph Wagner (1835-1917) is a crucial framework for understanding the growth and expansion

of government spending overtime. Wagner’s law of increasing state activity suggests that as an

economy develops, the role of government and spending tend to increase. This growth is driven

by factors such as income elasticity of demand for public services, social welfare, income

redistribution and administrative expansion. An example of Wagner’s Law can be seen in

expansion of government educational programs in developed nations and also increased

investment in infrastructure. Wagner’s theory, irrespective of criticisms remains theoretical

framework for understanding the relationship between economic development and government

interventions in modern economies.

2.3 Empirical Literature

Several empirical studies have examined the relationship between government expenditure

and human capital development in Nigeria. These studies have employed various methodologies,

including econometric analysis, and case studies, to investigate specific dimensions of human

capital, such as educational attainment, healthcare outcomes, and skills acquisition. Findings

20
accepts education as one of the primary components of human capital since education, other than

improving productivity of labor, has certain spillover benefits (externalities) meaning that in

addition to benefiting the individuals who receive it, In modern economies, human capital is a key

determinant of economic growth. Mekdad et al. (2014). Factors such as corruption, political

instability, and weak institutional frameworks can hinder the impact of government expenditure

on human capital outcomes.

Oluwatobi and Ogunrinola (2011) examines the relationship between human capital

development efforts of the Government and economic growth in Nigeria within a period of 1970-

2008. The dependent variable in this is the RGDP while the independent variables include

government recurrent and capital expenditure on education and health, gross fixed capital

formation and the labour force. The objective of study was to examine the impact of an aggregation

of capital and recurrent expenditure on health and education. This research made use of the

augmented Solow growth model as its technique of analysis. Findings from this study shows that

there exists a positive relationship between government recurrent expenditure on human capital

development and the level of real output, while capital expenditure was found to be negatively

related to the level of real output. The Study recommends appropriate channeling of he nation,s

capital expenditure towards education and health..

Obi and Obi (2014) in their paper titled Impact of government expenditure on education:

The Nigerian experience (1981 – 2012) using basic OLS found that educational expenditure is

statistically and positively significant to Nigeria's economic growth. The findings suggested that

recurrent expenditure in education does not support economic growth in Nigeria. It also stated the

factors that contributes to this problem to be; labor market distortion, education staff redundancy,

brain drain, industrial disputes and job discontinuities, government failure, outdated technical

21
equipment, and inadequate funding for schools. To regenerate education in Nigeria, the study

suggests that it is crucial to address these issues and improve the overall educational system.

Studies from Mekdad et al (2014), analyzes the relationship between public education

expenditure and economic growth in Algeria (1974-2012). The variables employed in this research

include RGDP as the dependent variable and Capital, Labour and Expenditure on education as the

independent variable. The study utilized the use of OLS, Johansen co-integration test and causality

test as it analytical technique with an objective of studying the relationship education and

economic growth. Findings from this study showed that public education expenditure in the

correlation analysis indicated a strong positive relationship with economic growth. This study

concluded that education is the main causal force for economic growth in Algeria and that the

impact of education is likely to show only after a long time period.

Prof Anyawu et al (2015) critically analyzed the impact of human capital development on

Nigeria's economic growth over a period of 1981-2010, using the endogenous growth model within

the autoregressive distributed lag (ARDL) framework. The variables used in this research include,

GDP as the dependent variable and gross capital formation, government total expenditure on

health, labour force, primary school enrollment, secondary school enrollment and tertiary

enrollment as its independent variables. The main objective of the research was to determine the

long-run and short-run impact of human capital development on economic growth. Findings from

this study revealed that the human capital development indicators had a positive impact on

economic growth in Nigeria within the reviewed periods, however, their impacts were largely

statistically insignificant. Futher evidence indicated that was fully restored for any distortion in the

short-run. The study suggested that the government should invest more in human capital

22
development and prioritize health and education sectors, considering their growth potential in

Nigeria. Additionally, the government should focus on school enrollment.

Studies from Ayeni and Omobude (2018), examines the relationship between educational

expenditure and economic growth in Nigeria (1987-2016) using the Autoregressive Distributed

Lag (ARDL) and bound test approach. The variables used in this research include RGDP as the

dependent variable and recurrent educational expenditure and capital educational expenditure as

its independent variable. The objective of this study was reexamine the link between educational

expenditure and economic growth. Findings from this study revealed that the impact of educational

expenditure on RGDP is mainly a function of the educational type in Nigeria. This is premised in

the fact that only recurrent expenditure had both significant and positive long-run impact on

economic growth within the period of study. The study attributed these findings to the fact that

educational expenditure within the period of study was influenced by factors such as policy

mismatch, inadequate funding, less priority placed on capital expenditure and fund

misappropriation. It recommended institutional transformation, proper funding, and addressing

extraneous factors like corruption and embezzlement. Additionally, prioritizing capital investment

in technical and vocational education is crucial

Mariam and Ibrahim (2018) investigated the impact of government educational spending

on students' performance in Secondary School Certificate (SSCE) in Kaduna State, Nigeria within

the period of 2017. This study employed the use of tables, frequencies and percentages for

descriptive analysis while for the inferential, cross tabulation techniques were used. The objectives

of the study was to examine the effect of government spending and identify means to improve

student performance in SSCE in Kaduna state, Nigeria. Findings from this study revealed that

socio-economic factors like cost of schooling, adequate teaching and learning materials, school

23
facilities, and qualified teachers significantly impact students' performance in SSCE. The study

recommended that successive Nigerian government must give top priority to educational financing

and as a matter of urgency, government should invest massively in education.

Rambeli et al. (2021) in their study "The dynamic impact of government expenditure in

education on economic growth (1990-2022)" investigates the impact of macroeconomic variables

on Malaysia's economic growth using the vector error correction model. The variables utilized

during this research includes, Industrial Production (proxy for economic growth) as the

independent variable while gross fixed capital formation, employment, government expenditure

on education and broad money supply as its independent variable. The objective of this study was

to explore the relationship between government spending on education and the country’s economic

growth, specifically during the post crisis period of world crisis in 2008. Findings from the study

showed that the education-led growth hypothesis was supported in Malaysia during the 2008

economic crisis and also validated the role of capital and employment in post-crisis economic

development. The study recommended that government should continue to promote education

sector investment in order to boost economic growth in the short and long run and that financial

planning for national education policies must be carefully conducted to ensure future success.

A research conducted by Okerekeoti (2022) analyzed the impact of government

expenditure on education on Nigeria's economic growth from 1999 to 2020. The data set included

RGDP as the dependent variable and government expenditure on education as the independent

variable. The study employed the use of regression analysis and descriptive statistics to analyze

the data. The objective of this study was to determine the effect of government expenditure on

education and RGDP of Nigeria. Findings from this research showed a significant positive

relationship between government expenditure on education and RGDP at a 5% level of

24
significance. The study concluded that a one naira increase in government expenditure on

education would result in a 64% increase in the Real Gross Domestic Product. The researchers

recommend increasing public spending on education to improve the well-being of citizens and

invest in physical and human capital.

Bassey, et al. (2022) examined the impact of government expenditure on human capital

development within the period of 1981-2019. The variables used in this study included Human

development index (HDI) as the dependent variable and government expenditure on education and

health, government expenditure on other sectors, exchange rate and gross fixed capital with the

use of ARDL analytical technique. The objective of this study was to estimate the long run

relationship between human capital development and government expenditure on key

development issues like education and health. Findings from this study revealed that government

expenditure on education had a significant impact on human capital development both in long and

short-run. Moreover empirical evidence further revealed that it was only in the long run that health

expenditure delivered a steady positive effect on human capital development. Cumulatively,

expenditure on health and education improved human capital development by almost 16% in the

long run. The study recommends amongst others; a composite consideration in budgetary

allocation and implementation of expenditure on human capital development as it has the tendency

of allowing the effect of human capital development to be seen and felt.

2.4 Missing Gap

While existing studies have explored the impact of government expenditure on human

capital development by considering factors such as primary school enrollment rates and GDP per

capita, there is a notable gap in the literature regarding the comprehensive assessment of

government expenditure allocation strategies. Specifically, there is need to examine how

25
government allocate their expenditures across different components of human capital

development, including education and how these allocation choices are influenced by both

economic conditions (For example: GDP per capita) and theoretical frameworks of the human

capital theory and Musgrave’s public expenditure theory.

26
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter discusses the appropriate methodological framework relevant to achieve the

objective of the study. The procedures adopted to address the research design, the data collection

and analytic techniques utilized to carry out the research study will be presented through this

discussion. In light of the fundamental research objectives, relevant research questions, and

missing gaps in chapters one and two these topics are addressed.

3.1 Theoretical Framework

Unlike the endogenous theory employed by numerous authors (Roldan and Juan 2022,

Cordelia 2019, Barro 1990, Obi and Obi 2014), this study aims to employ the human capital theory

and Musgrave public expenditure theory to examine the relationship between government

expenditure and human capital development. When synthesizing the two theories, government can

use public expenditure strategically to support human capital development. Allocating funds to

education and training programs enhances workforce skills and knowledge, thereby strengthening

the economy’s overall productivity and competitiveness. Public expenditure directed towards

human capital ensures an educated, healthy and productive workforce, contributing to economic

growth and addressing social equity. In times of economic down turns, government can invest in

job training and support programs to help individuals regain employment and stabilizing the

economy. Basically, the synthesis involves using public expenditure to promote human capital

development while aligning with Musgrave’s principles of efficient allocation, equitable

distribution and economic stabilization.

27
3.2 Model Specification

By adopting the human capital theory and Musgrave’s theory as a theoretical framework,

let the economy’s human capital be represented by the following function. To achieve the given

objectives in chapter one, this research will adopt the following model for its analysis. The

mathematical model is started bas follow;

PSE = f (GEXE, GDPPC, INF)……………………………………….................. 4.1

The above functional relationship can be transformed into an econometric form as

presented below:

PSE t = β0+ β1t GEXE + β2t GDPPC+ β3t INF+ µt …………………….......................... 4.2

Where β0 is the constant and β1, β2, and β3 are the coefficients of the independent variables

while µ is the stochastic error term or the residual term.

β0- Represents constant term or the intercept to be computed in the estimated model

β1- Represents the parameter estimate of government expenditure on education.

β2- Represents the parameter estimate of Inflation.

Β3- Represents the parameter estimate of inflation rate

µt- Represents stochastic error term

t- Notation of time trend according to time series

Where:

PSE = Primary School Enrollment Rate (Proxy for human capital development)

GEXE = Government Expenditure on Education

GDPPC = Gross Domestic Product per capita

INF = Inflation rate

μ =Error term

28
3.3 Model Estimation Procedure

Augmented Dickey Fuller (ADF) unit root test and Philip Perron (PP). The Philip Perron

(PP) is superior to Augmented Dickey-Fuller (ADF) due to it robustness in the midst of

heteroskedasticity. However, both the ADF and PP suffer from low power and size distortion.

Ordinary Least Square (OLS) technique will be employed to estimate the model of the study. The

reason for using OLS is mainly because it minimizes the error sum of squares and has a number

of advantages such as un-biasness, consistency, minimum variance and efficiency, and because it

included a linear relationship between the independent and dependent variable. On the other hand,

ADF test and PP test were applied to ensure that the time series data used in the analysis have

constant mean and variance. The motivation is to hedge against spurious regression that may result

from applying OLS to non-stationary time series data.

3.4 Techniques of Data Analysis

The steps that will be used in the analysis of data are as follow:

i. The pre-estimation test.

ii. The estimation test.

iii. The post-estimation test.

3.4.1 Pre-estimation test

During the pre-estimation stage, emphasis is placed on the nature of the data, particularly

their stochastic aspects. In particular, the stationary features of the data are investigated in order to

determine the presence or absence of a unit root in the series and hence identify the order of

integration.

We assumed in this study that all variables are well behaved and stationary at their level

form. However, literature has shown that most macroeconomic variables are not mean reversing

29
due to their time sensitivity (Granger and Newbold, 1974., Dickey and Fuller, 1981., Pindyck and

Rubinfeld, 1998), and thus they are not stationary at their level form that is not integrated to order

zero. As a result, they will be subjected to a unit roots stationary test using the Augmented Dickey-

Fuller (ADF) and philip perron (PP) tests. Because of its robustness in the face of

heteroscedasticity, the Philip Perron (PP) method outperforms the Augmented Dickey-Fuller

(ADF). The ADF and PP, on the other hand, suffer from low power and size distortion.

3.4.2 Estimation test

Depending on the technique utilised, multiple coefficients or statistics are generated at this

point. When using regression equations, it is critical to follow the co-integration test. If there is no

co-integration and the variables are I (O), estimation can be done using ordinary least squares

(OLS). If, on the other hand, there is no co-integration and the variables are I (1), the regression

should begin immediately after the variables have been differentiated. If some of the variables are

I (O) and others are I (1), the auto-regressive distributed lagged model (ARDL) is the appropriate

regression technique. If co-integration exists, both a long run and a short run equation should be

approximated. It is also important to note that ARDL should only be used when the dependent

variable is I (1).

3.4.3 Post estimation test

Under this, various diagnostics were executed to establish the adequacy of the estimated

model. The following diagnostics are relevant:

i. Test for autocorrelation: Breusch- Godfrey (BG) is used. The BG test is preferred since

the lagged of the dependent variable is part of explanatory variables in the model.

ii. Test of misspecification: the Ramsey RESET (residual specification error test) is applied.

30
 iii. Test for heteroskedasticity: In order to ascertain whether or not the error term µ in the

regression model has a common or constant variance. The auto-regressive conditional

heteroskedasticity (ARCH) test is used.

iv. Test for normality: The Jarque-Bera test will be utilized in this aspect.

3.5 Types and Sources of Data

The data used for this research are annual time series data. The data on inflation rate and

government expenditure on education were collected from central bank of Nigeria (CBN)

Statistical Bulletin (2022) while data on Primary School enrollment rate and GDP per were sourced

from World Development Indicators and National Bureau of Statistics repectively for the period

1990-2022.

Table 3: Description and Sources of Data

S/N Variable Description Source
1 PSE This is a metric that measures the percentage of WDI, 2022
eligible children who are enrolled in primary
education. It provides an essential indicator of a
country’s commitment to education and access to
schooling for its younger population
2 GEXE The percentage of the general government's CBN, 2022
expenditure on education, including current,
capital, and transfers, is calculated as a
percentage of the total government expenditure
on all sectors. (Independent Variable).
3 GDPPC Measures a country’s economic output divided NBS, 2022
by its population.
4 INF Consumer price index used as proxy for inflation CBN, 2022
rate.
Source: Author’s Compilation, 2023.

31
 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS

4.0 Introduction

The estimates of the regression carried out in this work are presented and analysed in this

chapter. In line with time series econometrics, the various descriptive statistics, pre-estimation,

estimation and post estimation tests are hereby presented and analysed.

4.1 Descriptive Statistics

Table 4: Result of Descriptive Statistics

VARIABLES PSE GEXE GDPPC INF

Mean 91.05206 211.9506 1.611471 258498.8

Median 92.09110 119.0200 1.596033 13.00697

Maximum 102.1081 923.7900 12.27614 8529874.

Minimum 78.66348 0.290000 -4.507149 5.388008

Std. Dev. 6.054753 235.4806 3.790370 1484857.

Skewness -0.033208 1.224643 0.477850 5.480078

Kurtosis 2.401728 3.865236 3.486557 31.03125

Jarque-Bera 0.498219 9.277992 1.581389 1245.579

Probability 0.779495 0.009667 0.453530 0.000000

Observations 33 33 33 33

Source: Researcher’s computation (2023) E-views 10

Table 4 presents the results of the descriptive statistics of the variables employed I the

model. It was observed that the mean value of PSE is 91.05206. The highest mean value is that of

INF at 258498.8 and the lowest mean value is 1.611471 which is that GDPPC. GEXE also has a

mean value of 211.9506. The also result shows that all the variables in the series have positive

32
median values, which means they were evenly distributed. INF has the highest maximum value of

8529874.1, while GDPPC has the lowest maximum value of 12.27614. The maximum values of

PSE and GEXE are 102.1081 and 923.7900 respectively. PSE has the highest minimum value

of 78.66348, while GDPPC has the lowest minimum value of -4.507149. INF has the highest

standard deviation value of 1484857.1, while PSE has the lowest standard deviation value

of 6.054753. This shows the amount of variation or dispersion of the set values. A low standard

deviation indicates that the values are spread out over a wider range. The Jarque-Bera probability

of the series shows that two variables (GEXE and INF) are normally distributed based on the null

hypothesis at 5% level of significance.

4.1.1 Trend of the Variables

PSE GEXE
105 1,000

100
800

95
600
90
400
85

200
80

75 0
1990 1995 2000 2005 2010 2015 2020 1990 1995 2000 2005 2010 2015 2020

GDPPC INF
15 10,000,000

8,000,000
10

6,000,000
5
4,000,000

0
2,000,000

-5 0
1990 1995 2000 2005 2010 2015 2020 1990 1995 2000 2005 2010 2015 2020

33
 The figures above show a graphical representation of all the variables used in the study.

The figure displays the upward or downward movement for the selected variables over the study

period.

4.2 Data Analysis

4.2.1 Unit Root Test Results

For consistency, stability and reliability of the variables in the model, we subjected the

variables to unit root stationary test using the Augmented Dickey – Fuller (ADF) and Phillips-

Perron (PP) tests. The choice of the two test types is to ensure comparison and consistency. The

result of PP is chosen because it is more superior in the midst of heteroscedasticity and

autocorrelation. The result shows that some of variables are non-stationary at levels, therefore we

cannot reject the null hypothesis at a 5% level of significance. However, the result shows that the

variables LGDPP and LINF are stationary at levels, while variables LPSE and LINF are stationary

at first difference at a 5% level of significance. This justifies the use of Autoregressive Distributed

Lag (ARDL) technique since the variables are integrated in a mixed order.

Table 5: Stationary Test Result

ADF t-statistics PP t-statistics
Variables Levels 1st Difference Levels 1st Difference Order
PSE -2.344522 -4.965153* -2.492058 -5.181104* I(1)
GEXE 0.312460 -4.724219* 1.541438 -4.490923* I(1)
GDPP -3.618782* -9.556208 -3.702834* -20.60261 I(0)
INF -2.499949** -5.099026 -5.567739* -31.07588 I(0)
Source: Researcher’s computations using E-views 10. Note: The table reports the ADF and PP
test statistics. *, **, *** indicates significance levels at 1%, 5%, and 10% respectively.
4.2.2 Test for Co-integration

The ARDL bound test results is presented below in table 4.3

Test Statistics 5% Critical value 5% Critical value Remark

bound bound
F-statistics Lower bound I(0) Upper bound I(1)
3.975376 2.79 3.67 Co-integration

34
 From the result above, it is clear that there is a long run relationship amongst the variables.

When Primary school enrolment rate is the dependent variable, its F-statistics (3.975376) is greater

than the upper bound critical value at 5% significance level. This implies that the null hypothesis

of no long-run relationship amongst the variables is rejected. Hence, there exist a long-run

relationship between the dependent and independent variables.

Table 6: Estimated Coefficients

Panel 1: Long-run Estimation

Variable Coefficient Std. Error t-Statistic Prob.*
PSE(-1) 0.798445 0.210066 3.800932 0.0010
PSE(-2) 0.061234 0.270903 0.226036 0.8234
PSE(-3) -0.525930 0.208388 -2.523797 0.0197
GEXE -0.001459 0.003728 -0.391442 0.6994
GDPPC 0.182868 0.269717 0.678001 0.5052
GDPPC(-1) 0.509973 0.256711 1.986566 0.0602
INF 8.23E-07 5.64E-07 1.458990 0.1594
INF(-1) 8.02E-07 5.81E-07 1.380910 0.1818
C 59.56480 19.34035 3.079821 0.0057

Panel 2: Short-run Estimation

Variable Coefficient Std. Error t-Statistic Prob.
D(PSE(-1)) 0.464696 0.177691 2.615196 0.0162
D(PSE(-2)) 0.525930 0.187031 2.811994 0.0104
D(GDPPC) 0.182868 0.217747 0.839821 0.4105
D(INF) 8.23E-07 3.82E-07 2.153265 0.0431
CointEq(-1)* -0.666252 0.136963 -4.864458 0.0001
Source: Author’s computation using Eviews 10

F-statistics: 6.281924 (0.000340)

Adjusted R-squared: 0.593013

R-Squared: 0.705285

35
4.3 Result Interpretation and Findings

Lagged Primary School Enrollment Rate (PSEt-3)

There is a positive relationship between Lagged Primary School Enrolment rate and

Primary School Enrolment rate. The coefficient of LPSE is -0.53, this means a 1% increase in

LPSE causes Primary School Enrolment Rate to significantly reduce by 0.53%.

Government Expenditure on Education (GEXE)

There is also a negative relationship between GEXE and Primary School Enrolment rate

such that a 1% increase in GEXE causes PSE to reduce by 0.001%. However, decrease is

insignificant.

Lagged Gross Domestic Product Per Capita (LGDPPCt-1)

There exist a positive relationship between LGDPPC and PSE. The coefficient value of

this variable is 0.509973. This means a 1% increase in LGDPPC causes PSE to increase by 0.51%.

This Increase however, is statistically significant.

Lagged Inflation Rate (LINFt-1)

The relationship between LINF and PSE is positive as controlled variable. A 1% increase

in LINF causes Primary School Enrolment rate to increase by 8.02%. However, this increase is

statistically significant.

F-statistics: 6.281924 (0.000340): The F-stat is significant at 5%. This shows that all variables

GEXE, GDPPC, and INF all have a joint impact on the dependent variable (Primary School

Enrolment rate).

Adjusted R-squared: 0.593013: There is 0.59% changes in Primary School Enrolment Rate as a

result of changes in PSEt-3, GEXE, GDPPCt-1, and INFt-1. Therefore, the forcasting ability of this

model is high.

36
Error Correction Model (ECM)

The error correction model or error correction mechanism is been found to have fulfilled

the necessary requirement. Its coefficient (-0.666252) is negative and statistically significant at 5%

level. -0.666252 means it has a high speed of correction.

4.3.1 Post Estimation Test

It is important that in empirical analysis after estimation, post estimation test should be

carried out in order to ascertain the adequacy of the model. Hence, this study carries out tests on

normality, serial correlation, heteroskedasticity, and misspecification. The summary is presented

below.

Table 7: Results of Model Diagnostic Tests

Test Residual Techniques Statistics Empirical P-value

Normality Jarque-Bera Jarque-Bera 0.348979 0.839886
Serial Correlation Breush-Godfrey X2 0.642056 0.5373
Heteroskedasticity ARCH X2 0.399569 0.5326
Misspecification Ramsey RESET F-statistics 3.347404 0.0823
______________________________________________________________________________

i. Jarque-Bera: 0.348979 (0.839886): This is used to test for normality of the residuals. JB

is not statistically significant hence, the hypothesis of no normality rejected. There is

normality of residuals.

ii. Durbin-Watson Serial test: 2.185897: Due to the presence of the lagged dependent

variable (PSEt-3), the DW test is inadequate. In this case, we use the Breush-Godfrey serial

correlation test.

iii. Breush-Godfrey: 0.642056 (0.5373): The Breush-Godfrey serial correlation test is

statistically insignificant at 5%. Therefore we reject the null hypothesis of autocorrelation.

This model does not suffer from autocorrelation.

37
iv. ARCH: 0.399569 (0.5326): At 0.5326, the ARCH test for heteroskedasticity is not

significant. Hence we reject the null hypothesis. Therefore, there is no heteroskedasticity.

v. RESET: 3.347404 (0.0823): The Ramsey RESET test for misspecification is not

statistically significant at 5% level of significance. Therefore we reject the hypothesis. This

model does not suffer from misspecification.

38
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This chapter is final chapter of this study which deals with summary of the whole work,

conclusion and recommendation base on the findings of the study.

5.1 Summary of the Findings

The analysis of the impact of government expenditure on human capital development,

particularly in primary enrollment rate, reveals several noteworthy relationships. The study

considered various factors, including the lagged primary school enrollment rate, government

expenditure on education (GEXE), lagged gross domestic product per capita (LGDPPC) and

lagged inflation rate (LINF). Findings indicates that the lagged primary school enrollment rate is

inversely related to the current primary school enrollment rate. Government expenditure on

education (GEXE) shows a negative relationship with the primary school enrollment rate, but this

relationship is not statistically significant. On the other hand, lagged gross domestic product per

capita (LGDPPC) exhibits a positive and statistically significant relationship with primary school

enrollment. This study also identifies a positive and statistically significant relationship between

lagged inflation rate (LINF) and primary school enrollment rate.

5.2 Conclusion

The study underscores the importance of government expenditure on education in fostering

primary school enrollment. The analysis suggest that there are complex relationship between

government expenditure on education, economic factors (GDP per capita) and the lagged variables

(PSEt-3 and INFt-1) with primary school enrollment rates. The inverse relationship between PSEt-3

and PSE implies that efforts to increase enrollment rates may need to consider factors beyond

39
historical enrollment rates. While GEXE appears to have a negative effect on PSE, the

insignificance of this relationship warrants further investigation. However, the positive

relationship between GDPPCt-1 underscores the importance of economic development in

promoting primary school enrollment. However, the significant relationship between INFt-1 and

PSE indicates that a moderate inflation can stimulate primary school enrollment. Additionally, the

disparity between the current government expenditure and UNESCO’s recommendations

highlights the urgency of increasing investments in education to promote human capital

development and ensure a more equitable and prosperous future.

5.3 Recommendations

Based on these findings, it is therefore recommended that;

1. Policymakers should consider policies that target improving primary school enrollment

rates, focusing on factors, other than just historical enrollment rates. Addressing socio-

economic disparities and providing incentives for enrolment may be beneficial.

2. To enhance human capital development, policymakers should prioritize increasing

government expenditure on education to meet UNESCO’s recommendations. Adequate

funding is crucial for improving educational infrastructure and quality.

3. To align with Musgrave’s principles, the importance of equitable distribution of

educational resources to ensure equal access to quality education should be emphasized as

this can help address enrollment disparities, efficient allocation strategies should also be

implemented to maximize available funds thus, enhancing the quality and accessibility of

educational services.

4. Economic stabilization policies should also be emphasized, as a higher GDP per capita and

a moderate inflation positively influences primary school enrollment rate, making

40
 economic stability a cornerstone for the advancement of education and human capital

development.

5. Further research is recommended to explore the nuances of government expenditure on

education and identify specific areas where investment can yield the most significant

improvements in human capital development.

41
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43
 APPENDIX I
DATA SET
CC PSE GEXE INF GDPPC
1990 86.49156 2.4 7.3644 8.877
1991 85.64646 1.26 13.00697 -2.18037
1992 89.70445 0.29 41.58884 2.023629
1993 93.81847 8.88 57.16525 -4.50715
1994 93.60667 7.38 57.03171 -4.31075
1995 89.30061 9.75 72.8355 -2.5956
1996 78.66348 11.67 29.26829 1.596033
1997 86.4916 14.85 8529874 0.37252
1998 93.4909 13.59 9.996378 0.032474
1999 94.1129 43.61 6.618373 -1.94111
2000 98.6895 57.96 6.933292 2.317775
2001 96.37557 39.88 18.87365 3.146425
2002 98.00531 80.53 12.87658 12.27614
2003 99.46706 64.78 14.03178 4.495156
2004 100.677 76.5 14.99803 6.345041
2005 101.3651 82.8 17.86349 3.609661
2006 102.1081 119.02 8.225222 3.238343
2007 93.31004 150.78 5.388008 3.741687
2008 84.13864 163.98 11.58108 3.899943
2009 85.38784 137.12 12.55496 5.130162
2010 85.11785 170.8 13.7202 5.081875
2011 90.67124 335.8 10.84003 2.437007
2012 92.09114 348.4 12.21778 1.403509
2013 94.11853 390.4 8.475827 3.832366
2014 90.10355 343.75 8.062486 3.552162
2015 86.42725 325.19 9.009387 0.076962
2016 84.72564 339.28 15.67534 -4.05271
2017 79.08394 403.96 16.52354 -1.70987
2018 87.45423 465.3 12.09473 -0.59039
2019 85.73025 593.33 11.39679 -0.26346
2020 92.0911 646.75 13.25 -4.16206
2021 93.31 620.59 16.95 1.182828
2022 92.942 923.79 18.85 0.823296
Source: Central Bank of Nigeria, World Development Indicators
National Bureau of Statistics (2022)

i
 APPENDIX II
REGRESSION RESULT

Dependent Variable: PSE

Method: ARDL
Date: 10/13/23 Time: 20:02
Sample (adjusted): 1993 2022
Included observations: 30 after adjustments
Maximum dependent lags: 4 (Automatic selection)
Model selection method: Akaike info criterion (AIC)
Dynamic regressors (4 lags, automatic): GEXE GDPPC INF
Fixed regressors: C
Number of models evalulated: 500
Selected Model: ARDL (3, 0, 1, 1)
Note: final equation sample is larger than selection sample

Variable Coefficient Std. Error t-Statistic Prob.*

PSE(-1) 0.798445 0.210066 3.800932 0.0010

PSE(-2) 0.061234 0.270903 0.226036 0.8234
PSE(-3) -0.525930 0.208388 -2.523797 0.0197
GEXE -0.001459 0.003728 -0.391442 0.6994
GDPPC 0.182868 0.269717 0.678001 0.5052
GDPPC(-1) 0.509973 0.256711 1.986566 0.0602
INF 8.23E-07 5.64E-07 1.458990 0.1594
INF(-1) 8.02E-07 5.81E-07 1.380910 0.1818
C 59.56480 19.34035 3.079821 0.0057

R-squared 0.705285 Mean dependent var 91.42918

Adjusted R-squared 0.593013 S.D. dependent var 6.206280
S.E. of regression 3.959328 Akaike info criterion 5.833351
Sum squared resid 329.2019 Schwarz criterion 6.253710
Log likelihood -78.50026 Hannan-Quinn criter. 5.967827
F-statistic 6.281924 Durbin-Watson stat 2.185897
Prob(F-statistic) 0.000340

ii
 APPENDIX III
POST ESTIMATION TEST RESULTS

Ramsey RESET Test

Equation: UNTITLED
Specification: PSE PSE(-1) PSE(-2) PSE(-3) GEXE GDPPC GDPPC(-1)
INF INF(-1) C
Omitted Variables: Squares of fitted values

Value Df Probability
t-statistic 1.829591 20 0.0823
F-statistic 3.347404 (1, 20) 0.0823

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 0.642056 Prob. F(2,19) 0.5373

Obs*R-squared 1.899189 Prob. Chi-Square(2) 0.3869

Heteroskedasticity Test: ARCH

F-statistic 0.399569 Prob. F(1,27) 0.5326

Obs*R-squared 0.422908 Prob. Chi-Square(1) 0.5155

6
Series: Residuals
Sample 1993 2022
5
Observations 30

4 Mean 3.98e-15
Median -0.139883
3 Maximum 6.670801
Minimum -7.544082
Std. Dev. 3.369242
2
Skewness -0.101659
Kurtosis 2.512306
1
Jarque-Bera 0.348979
0 Probability 0.839886
-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7

iii