Investment in Human Capital Remains Key to Unlocking Nigeria’s Economy

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Friday, July 06, 2018 /09:50AM /FDC 

Nigeria is the most populous country in Africa, and the 7th in the world, with approximately 193 million4 people. With such a large population, the African economy should be resting on a gold mine of human capital, viewed as a significant asset to a developing nation’s growth. However, this potential has remained relatively untapped owing to a lack of adequate investment and policy avoidance. Even the most recent federal economic plan, the Economic Recovery Growth Plan (ERGP) focuses solely on investment in physical infrastructure with little attention on addressing the urgent needs of the people (education, health, job, skills). For the country to fully enjoy the benefits that are associated with its high population, greater priority needs to be accorded to investment in human capital. 

The most notable examples of countries that have effectively leveraged human capital on the path to development are the Asian Tigers (Singapore, Tai-wan, Hong-Kong and South Korea). Singapore, at independence, was a poverty-stricken country with rapid population growth and virtually no natural resources, aside from its deep sea port. 

However, with strong emphasis on developing human resources, and massive investment in human capital, the country has become one of the most developed countries in Asia. The country was able to prioritize human capital in its strategic economic plans, and integrate the educational system properly to meet with industry standards. Also, proper attention was paid to curriculum de-sign, integrating vocational and technical training into the for-mal academic system.

The educational system was designed to be dynamic to accommodate societal needs with high cohesion between policies and implementation. In 2017, the World Economic Forum’s Global Human Capital Index ranked Singapore, an economy with about 5.6 mil-lion people, 11th out of 130 countries while Nigeria, with a population of about 193 mil-lion, was ranked 114th. Nigeria was ranked 122nd and 124th respectively in development and know-how sub-indices. 

Indeed, the role played by human capital in the development process of a nation can-not be overemphasized. It is especially critical in creating an enabling environment for job creation to combat brain drain. However, Nigeria is yet to in-vest fully in developing a skilled labor pool with technical skills. 

Constraints to human capital development

Despite Nigeria’s consistent population growth (2.5%)6, the economy is yet to unlock the full potential embedded in such a great asset. This is owing to a number of factors. 

Human capital flight 

Human capital flight remains a major concern in developing nations, especially Nigeria. The number of people leaving the country for greener pastures is on the rise. This is largely due to the poor state of health, high level of unemployment (18.8% in Q3’17) and rising poverty rate in the country (80% below the poverty line), not to mention insecurity.7 While human capital flight comes with the benefit of in-creased remittances in the country (by 10% in 2017 to $22bn from $19.4bn in 2016), the rise in the number of emigrants has reduced the number of skilled workers in the country. This ultimately deprives Nigeria of the even greater potential benefits if the human capital were to remain. 

Furthermore, the quality of the Nigerian educational system deteriorates day by day. This coupled with the frequent strike actions has led to an in-crease in the number of people who leave the country to acquire education outside the country. Unfortunately, a greater proportion of these people fail to return to the country after the completion of their studies. Additionally, a huge number of experts in the formal sector leave the country in search of better opportunities in more developed nations.

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Mismatch between formal education and industry requirements 

There is a huge divergence between what is taught in the Nigerian educational system and what is required in the corporate world. This is partly due to outdated curriculum and its lack of responsiveness to Nigeria’s evolving economy.

Curriculums are not usually updated to accommodate the dynamics of the corporate environment. In addition, little attention is paid to vocational and technical training whereas most of the jobs in the real sector require technical skills. Hence, the establishment of more vocational institutes will help to equip people with the requisite skills. The training will also improve the quality of services, output and productivity, thereby contributing to the reduction in the unemployment rate, poverty level, and crime rate in the country. 

The way forward 
Efforts need to be geared to-ward reducing brain drain in the country. To achieve this, the government needs to re-vamp the real sector and integrate the informal sector fully into the economy. Stringent policies that negatively impact efficient business administration in the formal sector and constrain further expansion of economic activities should be revisited and improved upon. The Ease of doing business ranking in Nigeria improved to 145th position in 2017 from 169th position in 2016. This was partly attributable to the Presidential Enabling Business Environment Council (PEBEC) initiatives introduced by the government in order to make the country a more globally competitive environment in attracting both domestic and international investments. 

In addition, technical skill acquisition programs need to be fully integrated into the curriculum. This will help to develop entrepreneurial capacity in graduates and help to reduce the unemployment rate. This is a major lesson that can be learned from Singapore. Its ability to integrate vocational and technical education in its curriculum helped to develop human capital which had an exponential impact on job creation, both through expedited job placement and encouraging the startup of new businesses. 

Employment rate increased by 24.3% to 3,669.4 in 2017 from 2,952.4 in 2008.

Finally, there should be in-creased access to financial re-sources (credit facilities) at a very low cost in order to enhance productivity and strengthen the sector to create more jobs to absorb the unemployed citizens. 

Although, lending rates have eased to an average of 21% pa from 25% pa, they are still at high levels. 

According to the World Bank Ease of Doing Business Re-port, Nigeria recorded a huge improvement on ease of get-ting credit. The country moved up to the 6th position in 201712 from 44th and 59th position in 201613 and 201514 respectively. This will play a key role in reducing brain drain in the economy. 

Inadequate investment in human capital poses significant threats to economic development. The constraints can be remedied by increasing credit to the private sector to sup-port job creation, improved curriculum design to support skills alignment and developing incentive policies to keep Nigerian talent in Nigeria.

 
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