THE IMPACT OF GOVERNMENT EXPENDITURE ON HUMAN CAPITAL DEVELOPMENT IN NIGERIA

The sharp decline in Nigeria’s governmental expenditure on education and health has sparked considerable debate among scholars and investors. This paper examines the long-run relationship between government spending on education and health and Human Capital Development (HCD) in Nigeria. Using a Vector Autoregression (VAR) model, the results reveal that the Human Development Index (HDI) is significant in the current year (-1) but shows an insignificant convergence in previous years. Furthermore, the joint significance test indicates that current values of education (EDU) and health (HTH) expenditures are the most influential factors determining current HDI values. These findings suggest that the nature, pattern, and level of government expenditure in education and health are critical in shaping Human Capital Development in Nigeria, despite their insignificant direct effect on the HDI.