Nigeria’s Greatest Asset- Its Human Capital by Prof Muhammad Ali Pate

Nigeria’s Greatest Asset- Its Human Capital by Prof Muhammad Ali Pate
(Being a paper delivered at Barewa Old Boys’ Association BOBA Annual Lecture and Award in Abuja)

Upfront, let me start by stating that, Nigeria’s demography, currently at about an estimated 220 million, is among the fastest growing, youthful, demography in the world, projected to reach 450 million, 4th or 5th most populous nation on earth, by 2050. It is Nigeria’s greatest asset. Not oil, not minerals.

Our palpable historical richness, cultural diversity, energy, creativity, geography, as well as natural resource endowments provide a fertile background for harnessing the most important asset that we have, to elevate Nigeria of the present to a future of greatness, a beacon of hope for Africans worldwide.

However, policymakers at Federal and State levels face the reality that public investment resources are limited, especially now, to determine what choices to make between immediate urgent issues like roads, electricity, other physical infrastructure, and those that directly harness the nation’s human capital.

I will do a few things here: first, highlight the state of Nigeria’s human capital; second, share available evidence between investing in human capital and socio-economic development; and third, outline a few options on how we may move forward.

State of Nigeria’s human capital

Despite having a large, youthful population, Nigeria’s human capital development outcomes are unfortunately amongst the worst in the world. In terms of health, we are on average, among the bottom 5 performers in the world, with women dying from childbirth (maternal mortality), children less than one year dying (infant mortality), children under-five dying (child mortality), and life-expectancy. We are also among the bottom 10 performers in the world in terms of child stunting (malnutrition). Moreover, we have a double burden of disease, meaning in addition to infectious diseases like malaria, tuberculosis, and others, we have a fast-growing burden of non-communicable diseases such as diabetes, hypertension, cancers, and mental ill-health. At the same time, we are also aging, with at least 5 percent of the population considered aged.

The average health numbers hide significant intra-country differences. Take child stunting as an example, the difference between the worst-performing zone and the highest-performing zone in Nigeria is at least three folds. The difference between the worst performing and the highest performing zones is at least four folds for child mortality. There are also several folds difference between the poorest 20 percent of the population and the wealthiest 20 percent of the population on basic health service utilization (like immunization and antenatal visits), maternal mortality, and total fertility rates.

As for the state of education, with nearly 20 million children out of school and an estimated 70 percent learning poverty among children in school, we have a two-tiered educational system, the public basic and secondary education track, which is largely off-track and private basic and secondary education for the children of wealthier Nigerians. We also see this divergence in higher education between public domestic education, even though still modestly functioning, and the glorified university education abroad for children of the wealthier Nigerians. With this, I am sure you can begin to see the dangers ahead, of a highly unequal society, where the gap between the “haves” and “have-nots” is widening.

The fundamental issue behind the above dismal performance is poor government spending on human capital, both in absolute numbers and as a percentage of our national GDP. The low government spending applies to the Federal Government as well as to State Government spending.

Linking human capital to socio-economic development

Now, let me turn to the evidence of the apparent association between human capital development outcomes and economic growth. This is well established, and I will use some of the analysis of my good friend and colleague, a distinguished economist, Professor David E. Bloom, of Harvard University, to illustrate.

The healthier, more educated, and more productive a nation’s population, the more likelihood that that nation will have sustainable, equitable socio-economic development. Healthier, educated girl adolescents grow into healthy, empowered young women who become healthier mothers. During gestation, the developing fetus of a healthier, active, safe mother is exposed to less stress, grows better and is likely to reach term before delivery into a healthy newborn. A breastfed and immunized infant is more likely to survive the transition between newborn and early childhood. Well nourished, fully immunized, and intellectually stimulated child is more likely to get into primary school ready to learn. A well-nourished, healthy child will tend to stay longer in school, successfully transition from class-to-class, have overall better educational attainment and outcomes, and higher lifetime earnings. In turn, increased incomes by individuals and households will then allow governments and households to invest more heavily in human capital development. The virtuous cycle then continues.

Borrowing from David Bloom, the summary diagram (Figure 3) below presents the theoretical and empirical evidence supporting the clear idea of the links between spending on health and education and economic development. In contrast, the evidence that infrastructure-related investments drive economic growth is less clear cut.

The empirical evidence from low- and middle-income countries shows that a 10 percent increase in life expectancy at birth corresponds to 1 percentage point increase in annual GDP per capita growth in the short-term and 0.4 percentage point growth rate in the medium to long term. Similarly, a yearly rise in average educational attainment corresponds to a 0.7 percentage point increase in annual growth in the short-run and 0.3 percentage point higher growth in the medium to long-run. With compounding over time, such rates of change can result in several folds increase in GDP per capita.

The above findings by Bloom and Colleagues are very plausible if one considers that better educated population are more likely to be productive, participate in the labor force, have longer working lives, more likely to establish successful and productive firms, adopt and efficiently assimilate technologies from abroad, and enhance the productivity of their co-workers through beneficial synergies and spillovers. Their results suggest that, on average, individual income is 10% higher for each additional year of schooling received. One year increase in average educational attainment is associated with a 0.5 – 1.2 percentage point increase in the annual growth rate of GDP per capita. Likewise, a 25-point improvement in the Program for International Student Assessment (PISA) score – a measure of educational quality – is equally associated with a 0.5 percentage point increase in annual GDP per capita growth. Investments in primary education generally offer higher returns than investments in secondary and higher education, and investments in high quality pre-primary education can also have substantial positive returns, even in very low-income settings. Returns for girls’ education are also generally higher than for boys’ education and have important spillover effects through promoting stronger families and communities, especially where there are significant gender gaps in educational attainment.

The same research also revealed that investments in health also enhance productivity and economic growth through several channels, including (i) healthier workers tend to be more consistently working, and more productive when working; (ii) healthier children tend to perform better in school, attend school for more years, and accumulate more human capital in the process, which tends to enhance their productivity and incomes in adulthood, (iii) healthier individuals have greater incentive to pursue education and save for retirement, (iv) healthier populations are more powerful attractors of foreign direct investment, and (v) health investments that cure or prevent infectious diseases (such as vaccination) have positive spillovers to other individuals.

Good macro-level evidence suggests that health is an important determinant of economic growth. Estimates from the literature indicate that a 10% increase in the adult survival rate leads to a 6.7% increase in productivity per worker and a 4.4% increase in GDP per worker. Other research estimates that, on average, a one-year increase in life expectancy at birth causes a 4% increase in GDP per capita.

In addition to enhancing productivity, investments in education and heath facilitate escape from the often-crushing burden of youth dependency. Poor countries tend to have much higher youth dependency rates than wealthier countries. Supporting the basic needs of a relatively large child population imposes a substantial resource burden, necessitating the diversion of resources from other productive investments and impeding, for decades, the pace of measured economic growth. As child survival improves and as women become healthier, more educated, and more empowered, desired fertility tends to decline. Major drops in fertility initiate a period of lower youth dependency, during which resources are freed up for other productive investments. If properly harnessed, this fertility transition can result in a sizeable boost to economic growth, known as the “demographic dividend”. Results from the literature imply that a fall in the TFR by one child leads to a 0.45 percentage point higher economic growth rate.

Other analyses suggest that one-third of East Asia’s “growth miracle” is due to the demographic dividend that followed the strong decline in fertility in China, South Korea, Hong Kong, Singapore, and Taiwan. This one-third figure corresponds to a 0.66 percentage point increase in the per capita GDP growth rate for each one-child reduction in the TFR.

In 2014, I led a study in collaboration with David Bloom, taking Nigeria’s population structure from its latest census data, disaggregated by states and geopolitical zones, and modeled both economic and population growth rate scenarios to 2050, to estimate Nigeria’s potential demographic dividends. Part of that work was published under the World Economic Forum, and I would highlight a few relevant insights. First, that the population structures are different in different zones, with more pyramidal structures in the northwest, northeast and northcentral, while southwest, southeast, and south-south zones had begun their demographic transitions with lower dependency. Second, that some regions like the southeast were ageing faster and beginning to experience a demographic lag due to the rising aged population. Third, that while all geopolitical zones of the country had prospects for reaping demographic dividends, most of the potential dividends can be expected in the northeast, northwest, and northcentral zones. However, the prospects are not guaranteed and require significant investments in health and education at the subnational levels to improve health and learning outcomes, reduce malnutrition, and empower girls and women. Failing to invest in human capital would mean the prospect of demographic dividend would remain elusive, particularly for the northern states and for Nigeria as a whole.

The Future of Nigeria

Now, let’s turn to the future.

Imagine it’s the year 2050. Nigeria stands as Africa’s leading powerhouse, with a population or more than 400 million, achieving an impressive annual average real GDP growth rate of 6.0 percent over nearly three decades. This economic transformation has propelled the nation into upper-middle-income status by size of its economy and its per capita annual income.

The remarkable progress is rooted in both private and public sectors’ productive capital accumulation, heightened employment opportunities, and enhanced total factor productivity.

A significant shift towards high-employment-intensity industries has further bolstered Nigeria’s prosperity, manifesting in substantial improvements in living standards. Notably, the total employment has soared from 46.49 million in 2020 to a remarkable 203.41 million. This surge has correspondingly led to a substantial decline in the unemployment rate, plummeting to a mere 6.30 percent.

Similarly, the number of people living in poverty witnessed a remarkable reduction, plummeting from 83 million in 2020 to less than 10 million. This translates to a significant drop in the poverty rate, from approximately 40 percent in 2020 to much smaller percent.

Nigeria has not only become an industrialized and dynamic economic force but has also transitioned into a knowledge-based economy.

At the core of this success story will be its investments in its greatest asset- its presently young and yet unborn population.

Actualizing this vision for a prosperous country, is to my understanding, at the heart of His Excellency President Bola Ahmed Tinubu, GCFR’s Renewed Hope Agenda for Nigeria. As a visionary leader, the President recognized that Nigeria’s success story towards becoming an economic powerhouse is intricately linked to its astute leveraging of the potential of its people to reap its demographic dividend.

At its core, a demographic dividend emerges when a country experiences a rapid shift in its population structure resulting in a youth cohort that can be effectively educated and empowered to contribute to the labor market.

Actualizing this bright future requires significant investments. President Tinubu recognized this fact and, therefore immediately upon coming to office, started bold reforms to expand the fiscal space and improved monetary policy to allow for mobilization of the resources needed to invest in the infrastructure side as well as human capital. The President in his wisdom, saw the convergence between health and social welfare and that a coordinated approach was needed, with the frame of a whole-of-government and sector-wide approaches.

In our coordination role for social welfare, we see impact of government through a life-course lens, where governments at Federal and State levels interface with individuals through their transitions across the life-course. From an adolescent girl who becomes a mother, to the healthy educated young man who becomes a father, to the child born into a family, thriving and well-nourished through school transitions, to be a responsible adult transitioning to labor marker as an adult, to health middle-age and dignified ageing.

Specifically, as regards to health, we see it as both a cause and consequence of economic growth. That’s why we set our goals to save lives, reduce physical and financial pain, and produce health for all Nigerians. We are embarking on major governance reforms, through a sector-wide approach, and collaboration between Federal and State Governments, as recently approved by Mr. President as well as the National Council on Health. Also, we are aligning external development assistance to our national priorities and supportive of public, private sectors, civil society and citizens engagement for better outcomes and impact.

We are expanding, alongside the States, investments in primary health care using the Basic Health Care Provision Fund and others, to make more primary health centers functional, with trained human resources, basic infrastructure and equipment, and commodities, to deliver immunizations, antenatal care, safe delivery, prevention, and treatment for hypertension, diabetes, and mental health. We are also going to expand health infrastructure and equipment at federal hospitals, including for cancer treatment, to address the needs of Nigerians and curb some outbound medical tourism. On human resources, we have recently increased the quotas of key human resources training institutions to begin to expand production.

To make the sector more productive, President Tinubu also approved a new initiative to unlock the healthcare value chains, to increasingly produce domestically some of the diagnostics, pharmaceuticals, and biologics that we need, to retain some of the economic value, create jobs locally, and ensure our health security.

To enable these actions, we are revamping our data architecture and will be collaborating with the Ministry of Communication, Innovation and Digital Economy to pursue digital transformation of the health sector. We are also defragmenting external financing to make it more efficient, effective, as well as transparent and accountable.

Conclusions and Way Forward

Nigeria’s greatest asset is its people. Their health, education, and social well-being should be at the center of all governance and policy actions.

Leadership and elite consensus are key to prioritize investing in basic health and education, particularly for adolescent girls, women, and children. Investing in human capital will unleash the inherent potential of Nigeria’s population and propel it to the brighter and more prosperous future envisioned in President Tinubu’s “Renewed Hope Agenda”.

Subnational leaders, especially Governors in the North of Nigeria, must refocus themselves to prioritize investing in basic health and education for their population.

To manifest the vision of President Tinubu for a prosperous Nigeria, we must tackle head on our high maternal, infant, child mortality, control vaccine preventable diseases, reduce burden of malaria and tuberculosis, deal with hypertension, diabetes, strokes, and cancers through prevention and treatment, and take care of our elderly populations. We must educate and empower the girl child and our women generally, economically, socially, and politically. We must ensure the boy child is also well educated to grow to a responsible adult. We must invest in our youth, help them to transition to adulthood and labor market through quality jobs. By quality jobs we mean well-paying jobs with career progression, harnessing the innovation and entrepreneurial spirit of Nigerians. Doing all these requires improved governance to heal and unify us as a people, collaboration across governments and sectors, stronger institutions, enhanced citizen-focus, reduced wastage, and corruption, improved and stable macroeconomic management overall.

I firmly believe that we can make it happen. That is why I was so grateful that President Bola Ahmed Tinubu allowed us to join his team, because I am confident in his leadership and that the Renewed Hope Agenda he has set forth, if executed as envisioned, will lead to Nigeria meeting its destiny as a great country in Africa and the world.

Muhammad Ali Pate, CON
Coordinating Minister of Health and Social Welfare
Abuja, Nigeria
November 25th, 2023