Impact of Human Capital Investment on Domestic Investment in Nigeria

This study examined the impact of human capital investment on domestic investment in Nigeria for the period 1980 to 2022. Adopting an ex-post facto research design, the study utilized secondary time-series data sourced from the World Development Indicators (WDI), Penn World Table (PWT), and the UNDP database. The econometric analysis was conducted using the Autoregressive Distributed Lag (ARDL) model and the Error Correction Mechanism (ECM) to ascertain both long-run and short-run relationships. The empirical results showed that the variables were integrated at levels I(0) and first difference I(1), justifying the use of the ARDL bounds test. Specifically, the findings revealed that education expenditure (EXED) has a positive and significant impact on domestic investment in the long run, with a coefficient of 0.238190. Conversely, public health expenditure (PUBH) demonstrated an insignificant relationship with domestic investment during the period under review. Private health expenditure (PREH) showed a negative and significant impact on domestic investment (coefficient: -0.379744, p < 0.05), while GDP growth rate (GDPGR) also exhibited a negative short-run impact (coefficient: -0.527545, p < 0.01). Diagnostic tests, including the Breusch-Godfrey serial correlation and Jarque-Bera normality tests, confirmed the robustness of the model. The study concludes that human capital investment is essential for economic progress but requires strategic efficiency. It recommends that the government prioritize and reform educational funding while improving medical infrastructure to align human capital development with national domestic investment goals.