article · Resources Environment and Sustainability
An examination of foreign direct investment and human capital development in Nigeria between 1981 and 2018 reveals complex interactions between capital inflows and workforce skills. Linear models show that foreign direct investment positively impacts human capital in the short run, but this effect becomes insignificant over the long term. However, non-linear analysis indicates that when investment inflows reach a specific threshold, they create a significant long-run increase in human capital. This effect emerges because sophisticated foreign technologies demand higher technical know-how and skilled labour to operate. Crucially, long-run causality runs in one direction, from human capital to foreign investment. A well-trained workforce is therefore a prerequisite for attracting sustainable international funding, underscoring the need for public policy to address domestic skills, security concerns, and structural obstacles.
Developing nations frequently assume that courting foreign investors will automatically upgrade domestic workforce capabilities. This research demonstrates that foreign capital alone does not guarantee long-term workforce improvement unless investment volumes are substantial. Because qualified local talent actively attracts foreign capital, governments must proactively invest in domestic education and remove infrastructural and security hurdles to achieve sustainable economic development.
The abstract does not indicate a commercial product pathway, as it focuses on macroeconomic analysis. However, the findings provide actionable evidence for economic development authorities, investment promotion agencies, and corporate strategists evaluating workforce readiness. Operating at the early policy-formulation stage, the insights can guide public-private training programmes and help institutional investors determine the skilled-labour thresholds necessary for successful technology transfer into the Nigerian market.
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The paper assesses the interconnections between FDI and human capital development in Nigeria over the period 1981–2018. The analysis is carried out with the use of both non-linear autoregressive distributed lag (NARDL) and linear ARDL bounds test approach to cointegration, and VECM Granger causality technique. Findings reveal that the effect of FDI on human capital is found to be insignificant in the long run, while it is significant in the short run. However, following the asymmetric link, the empirical evidence reveals that a rise in FDI inflows to a certain rate, in the long-run, could result in a significant increase in the level of human capital development, suggesting that the magnitude of inward FDI matters in the economy. This further implies that as FDI inflows require sound technical know-how, and more skilled labour to work with or adapt to more advanced technologies, such could draw attention to improved human capital. Results also indicate that there is unidirectional causality between FDI and human capital in the long run, which runs from human capital to FDI, suggesting that the quality of human capital matters for sustainable leverage and attractiveness of FDI inflows. By implication, it is critical to adopt policy measures that could engender the sustainable development of human capital by the government, while the underlying structural bottlenecks and protracted state of insecurity that could deter foreign investors are accorded significant attention.
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DOI: 10.1016/j.resenv.2020.100005
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