An Empirical Investigation of the Interactions Between Remittance Inflows and Human Capital Development (Implication for the Economic Growth in Nigeria)

ABSTRACT This study analyzes the interactions between remittance inflows and human capital development: implication for economic growth in Nigeria. Using Nigeria most recent data set on remittances inflows, human capital development and economic growth this study investigated how remittances inflow influences education and health spending in Nigeria. To unravel this, we adopted an Autoregressive Distributed Lag (ARDL) model. We estimated an error correction equation due to the long-run nature of the remittances inflows and human capital variables. The major finding is that remittances inflows to Nigeria exert significant and positive impact on human capital development proxy by education and healthcare spending. The study found that a unit increase in remittances inflow brings about 0.80units increase to education spending and 0.15units increase to health spending. Other findings are that GDP per capita growth rate, labour force participation rate, gross secondary and tertiary school enrolment also have significant impact on government education spending in Nigeria. The study found that in every one unit of disequilibrium in remittance impact of human capital development, 100 percent adjustment is made in a year lag. This implies that any disequilibrium in 1 year lag in the influence of remittances to human capital investment, 100 percent long-run correction is made; bring it to long-run equilibrium state. Also the disequilibrium in government health spending shows that 18 percent adjustment is made in the 1 year lag of disequilibrium in model 2. The consequence of this result is that model 1 has the fastest speed of adjustment. The highest correction of disequilibrium is observed in government education spending model compared with government health spending model. Finally, the study found that the human capital development impact of remittance-based investments tend to be nil, and that overcoming such limitations requires public interventions, such as, providing orientation and guidelines for investments, which will otherwise follow a spontaneous logic with little possibility of success, and help changing the structural conditions which inhibit or frustrate investments (chronic rural problems such as lack of irrigation, roads, energy supply, etc