Exploring the Nexus Between Foreign Aid and Human Capital Development in Nigeria

Abstract

This paper utilizes country-specific time series data over the period 1990-2017 and Autoregressive Distributive Lag (ARDL) model to estimate the relationship between and human capital development in Nigeria. The specific objectives focused on the impacts of official development assistance (ODA), broad-based grants and technical cooperation grants on public investments in education and healthcare. The Phillips-Perron unit root test results reveal that the variables are mixed integrated with evidence of levels and first difference stationarity. The mixed order of the integration in the series necessitated the application of ARDL bounds test for cointegration and the results indicate that the variables in each of the models have long run relationship. Findings from the estimated ARDL models reveal that lagged values ODA exert significant positive impact on public investment in education in the short run. Both the first and third lag of broad-based grant has significant negative relationship with public investment in education in the short run. The long run result revealed that ODA and technical cooperation grants have significant positive relationship with public investment in education. 1 percent increase in ODA and technical cooperation grants increases public investment in education by 4.289 percent and 0.829 percent respectively. It was further observed that the contemporaneous value of ODA has positive relationship with public healthcare investment in the short run. 1 percent increase in ODA inflow increases public healthcare investment by 1.099 percent. Additionally, there is more than proportionate increase in public investment in healthcare to the tune of 3.179 percent following 1 percent increase in ODA in the long run. Therefore, it is recommended among others that policy makers and donor countries/agencies should prioritize the education sector in the disbursement of foreign aid with a view to achieving the fourth Sustainable Development Goal (SDG) which is to ensure inclusive and quality education for all and promote lifelong learning.

Keywords: Human development, education, healthcare, ODA, grants, ARDL and Nigeria.

DOI: 10.7176/JESD/10-7-05

Publication date: April 30^th 2019