Exchange Rate Deregulation and Human Capital Development in Nigeria, 1986-2015

This research investigates exchange rate deregulation and human capital development in Nigeria from 1986-2015. Data were collected from the Central Bank of Nigeria Statistical Bulletin. The study examines the stochastic characteristics of each time series by testing their stationarity using Augmented Dickey-Fuller (ADF) and Philip Peron (PP) tests. The study also employed ECM for estimation. Variables used in this study included exchange rate, government expenditure on education, government expenditure on health, interest rate, inflation rate, gross domestic product (used as a proxy for the national income) and crude oil price. The results of the study suggest that a direct relationship exists between human capital development and a one-year lagged exchange rate, national income and crude-oil price in Nigeria. However, there is an inverse relationship between human capital development and variables such as two year lagged interest rate and a year lagged inflation rate.
Having seen that developments in exchange rate deregulation insignificantly impact on human capital development, it was recommended that government should allocate more financial resources to expenditure on health and education that comes as a result of depreciation of the exchange rate and also raise its percentage allocation in the budget to the 26 per cent minimum requirements mandated by UNESCO on expenditure and health and education.