Introduction to Human Capital Development

According to modern growth theory, the accumulation of human capital is an important contributor to economic growth. Numerous cross-country studies extensively explore whether educational attainment can contribute significantly to the production of overall output in an economy. Although macro studies have produced inconsistent and controversial results (Pritchett 1996), several micro studies that look into the same problem have shown a consistently positive relationship between the education of the workforce and their labor productivity and earnings. General finding is that individuals with more education tend to have better employment opportunities, greater earnings, and produce more output than those who are less educated. These findings provide a strong rationale for governments and households to invest substantial portions of their resources on education, with the expectation that higher benefits will accrue over time.

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Meaning and Definition of Human Capital Development

Human capital is the total stock or value of competencies, skills, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labour in order to produce economic value.

Factors Affecting the Efficiency of Human Capital

  1. Increased level of education: Provision of higher and specialized education increases the efficiency of human capital.
  2. On-the job training: Provision of formal and informal training programmes while employed, increase the skill of the workers and enhance the efficiency of human capital
  3. Improved health condition: Provision of better health facilities improve the health of the providers of labour, thereby enhancing their efficiency.
  4. Standard of living: An increase in the standard of living increases the efficiency of human capital.

Brain Drain and its Effect on the Nigeria Economy

Brain drain is the large scale emigration, over a comparatively short period, of a large number of highly skilled intellectuals and technical labour to more favourable geographic, economic and professional environment. E.g. large scale movement of Nigerians health-care professionals to India, America and other high income countries. It is also referred to as “capital flight”.

Reasons for Human Capital Flight

  1. Poor social environment in the source countries:The fewer life opportunities, political and social instability, economic depression and health risk cause the movement of labour in large scale from less developed countries to those countries with better opportunities.
  2. Better social environment in host countries:Owing to rich opportunities for profitable employment, political stability, better living conditions, developed economy, intellectual freedom, etc, there is large scale movement of labour to these countries.
  3. Individual reasons:These include family influence such as presence of overseas relatives, personal preference and ambition for an improved career.

Effects Brain Drain on Nigeria Economy

  1. Loss of professional skills and talents:The nation is denied the services and expertise they would otherwise have provided in various areas of the economy such as institutions of higher learning, health institutions, industries, etc, leading to low level of production and development.
  2. Capital waste:The resources used in training them, either in the forms of scholarships, loans, etc. are lost to the advanced countries which may have contributed little.
  3. Increased level of poverty:This is due to general low level of productivity arising from scarcity of highly productive labour.
  4. Decrease in wealth creation, employment and tax revenue: More entrepreneurs taking their investments abroad contribute to the high rate of unemployment and decreased wealth creation within the country, with a consequent reduction of tax revenue.
  5. Encourages Individuals to acquire greater education and skills:They do this in order to meet the demands of the advanced countries that are in demand of their services.

Effects of Brain Drain on the Destination Country

  1. Higher labour skills are available for services and production in other sectors of the destination country
  2. There is influx of illegal aliens who wish to take advantage of the greater opportunities available

How to Arrest Brain Drain

  1. Committed and selfless leadership with a mission and vision: Highly skilled labour will stay in the country if they discover that leaders are committed and are making genuine efforts at development.
  2. Provision of adequate working and living conditions:These would encourage highly skilled labour to remain in the country to contribute their quotas.
  3. Value re-orientation:Nigerians should be taught to believe that our collective hopes and aspirations can be met within the country.
  4. Setting up a national commission to handle the issue of brain-drain: This body would help to formulate policies and proper solutions to the challenges of brain-drain.


  1. What is human capital development?
  2. List five factors that affect the efficiency of human capital.
  3. How can brain drain be arrested?

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