The Human Capital Index and Total Factor Productivity in Nigeria (1960–2025)

This study investigates the impact of the World Bank's Human Capital Index (HCI) on Nigeria's Total Factor Productivity (TFP) over the period 1960–2025, incorporating an extensive battery of control variables to isolate the true relationship. Despite being Africa's largest economy by nominal GDP, Nigeria ranks among the lowest globally in human capital development, with an HCI score of 0.38 in 2020, placing it 168th out of 174 countries. Using time-series econometric techniques, including the Autoregressive Distributed Lag (ARDL) bounds testing approach, the Error Correction Model (ECM), and comprehensive post-estimation diagnostics, this paper examines whether improvements in human capital translate into measurable productivity gains. The findings reveal that the HCI exerts a positive and statistically significant effect on TFP in both the short and long run, though the magnitude remains constrained by institutional weaknesses, infrastructure deficits, and macroeconomic volatility. Control variables, including gross fixed capital formation, foreign direct investment, infrastructure quality, and institutional quality, significantly moderate the HCI-TFP nexus. The study contributes to the literature by providing the most comprehensive treatment of the HCI-TFP relationship in Nigeria to date, utilizing a 65-year dataset and seventeen control variables. The policy implications are stark: without targeted investments in education quality, healthcare delivery, and institutional reform, Nigeria's demographic dividend risks becoming a demographic burden.