Nexus between human capital formation and economic growth in Nigeria: The moderating roles of macroeconomic environment
Department Of Economics, Bamidele Olumilua University of Education, Science and Technology, Ikere-Ekiti.
Research Article
Open Access Research Journal of Multidisciplinary Studies, 2026, 11(02), 031-041.
Article DOI: 10.53022/oarjms.2026.11.2.0028
Publication history:
Received on 18 April 2026; revised on 19 May 2026; accepted on 21 May 2026
Abstract:
The study examined the relationship between human capital formation and economic growth in Nigeria between 1991 and 2024, using Vector Autoregressive (VAR) Model and Pairwise granger causality techniques. The study specifically examined the association among economic growth (RGDP), human capital formation (HCF), physical capital (PC), labour productivity (LPROTY) and macroeconomic environment captured by exchange rates (EXCR), interest rates (INTR) and foreign direct investment (FDI). The findings showed that a long-run relationship was not established among the variables. Through Wald test, the results showed that a short-run relationship was established among the variables employed such as human capital formation (HCF), physical capital (PC), labour productivity (LPROTY), exchange rates (EXCR), interest rates (INTR), foreign direct investment (FDI) and economic growth (RGDP). Unidirectional causality was established between foreign direct investment (FDI) and exchange rates (EXCR), trending from foreign direct investment to exchange rates (EXCR). Also, unidirectional causality was established between labour productivity (LPTOTY) and foreign direct investment (FDI), whereby labour productivity granger caused foreign direct investment. A uni-directional causality was established between between foreign direct investment (FDI) and interest rates (RINTR). Therefore, the study recommends that government should stabilize exchange rate policy in order to enhance foreign direct investment. Also, government should adequately monitor foreign direct investment and interest rates in order to positively contribute to labour productivity as it is expedient for government to increase expenditure on human capital so as to enhance labour productivity and economic growth in Nigeria.
Keywords:
Human Capital Formation; Physical Capital; Economic Growth; Labour Productivity; Foreign Direct Investment; Interest Rates and Exchange Rates.
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