By population

By population, we mean the number of people living within a geographical boundary. It is the whole number of inhabitants in a country. Population growth, on the other hand, means a change in the population size of a country. Such change could be positive or negative. It is said to be positive when there is an increase, and it is negative when there is a decrease in the number of individuals residing in a country. Population growth can also be defined as the average annual rate of change of population size during a specified period.
For the context of this research, we shall base our analysis of population growth on the increase in the population of a particular economy.
Human capital development
The term “human capital” was coined by Arthur Lewis in 1954 in his book “Economic Development with Unlimited Supplies of Labour.” Over the years, various economists have given a definition to the term but the term was popularized by two economists, Gary Becker and Jacob Mincer. They defined it as “the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labour so as to produce economic value.”
The concept of human capital could be said to refer to the abilities and skills of human resources of a country, while human capital development on the other hand, refers to the process of acquiring and increasing the number of persons who have the skills, education and experience that are critical for economic growth and development of a country’s economy (Okojie, 2005).
Budget Deficit
The government budget is the financial statement of the government’s proposed expenditure and expected revenue during a particular year. Thus, the government budget is divided into two parts, which are the expenditure and the revenue sections. It should be noted that the way the government would plan their budget for the year can be based on three aspects. It could be
• Balanced budget: this is where the expected revenue of the government equals it planned expenditure. In this situation, the amount the government wishes to relinquish is just the same as the amount the government wishes to earn.
• Unbalanced budget: this explains that there is no equality between the expected revenue and the proposed expenditure of the government during that particular year. A government budget is said to be a budget surplus if the expected revenue supersedes it estimated expenditure. While a budget deficit is one in which the government estimated expenditure is more than the expected revenue fir that particular year.
In the situation of a budget deficit, the government of such nation could be financing its revenue through domestic and/or foreign borrowing. The primary source of running such a budget is said to be taxation (which is an internal or domestic form of funding).

Above is a breakdown of the Nigerian budget for the year 2017. It can be seen that the Nigerian government has a proposed expenditure of N7.298 trillion and an estimated expenditure of N4.94trillion. The government plans to finance this budget largely through borrowing both externally (foreign) and internally (domestic). Domestic borrowing covers about N1.252 trillion while foreign borrowing is about N1.067trillion.

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Non-recurrent expenditure budget breakdown
Most of the budget is being channelled to the nation’s non debt recurrent expenditure and a total of 398 billion and 252.9billion is being channelled to government’s expenditure on education and health respectively.
Economic growth
Economic growth cam be defined as a steady growth in a nation’s GDP over a stipulated time period. Google defined economic growth as an expansion in a country’s ability to deliver products and ventures. That is, it is the expansion in the estimation of merchandise and ventures delivered by an economy. Stanlake and Grant, 1995 characterizes economic growth as any expansion in the Gross National Product (GNP) or Gross Domestic Product (GDP), yet for a few reasons this is a fairly deceptive utilization of the term. In Economics, economic growth regularly alludes to “development of potential yield i.e. creation at full business” instead of development of total request (David, 1994).
It is important to note that there is a clear difference between economic growth and economic development. Whereas economic growth is necessary for economic development, it is not sufficient enough for it. The sufficient reason would be the development of human capital of the economy. While Economic growth explains the rate of growth of the Gross Domestic Product (GDP), economic development on the other hand, explains …
THEORETICAL LITERATURE
THEORY OF POPULATION
The theories of population can be streamlined into three basic theories. They are the Malthusian theory, the demographic transition theory, and the optimum theory of population.
Malthusian Theory of Population
This theory was proposed by Thomas Malthus in his book “An Essay on the Principles of Population” published in 1798. Thomas Malthus was a British economist and was the first to propose a systematic theory to population.
He based his findings on the British economy of that time. He proposed in his principles that human population growth rate was increasing at a geometric population while food production was increasing at an arithmetic progression.
Optimum Transition Theory
This theory was propounded by Edwin Cannan in his book “Wealth” published in 1924. It was popularized by Robbins, Dalton and Carr-Saunders. This theory concerns itself between population size and wealth creation.
The definition of optimum population as given by Edwin Cannan is the ideal population which when combined with the other available resources or means of production of the country, will yield the maximum returns or income per head. Robbins, Dalton, and Carr-Saunders have each given this theory their own definitions.
• Robbins defined the theory of optimum transition as the best population which makes the maximum returns gotten in an economy possible.
• Dalton defines it as the population which gives the maximum income per head
• Carr-Saunders defines it as the population which produces the maximum economic welfare
From the definitions given above, it can be clearly seen that each of these economists are basically concerned with the maximum benefit of the economy as it concerns population. But the more scientific and realistic view is the view as given by Dalton.
These theories, just like other theories, is based on certain assumptions. These assumptions include
• The economy has a certain amount of natural resources that may change over time.
• The techniques of production adopted by this economy is constant
• Constant stock of capital
• The preferences and habits of the citizens of that economy does not change
• Even with a n increase in population, the ratio of the working population to the total population remains constant
• No change in the working hours of the population
• Constant organisation of business
These assumptions explains that ceteris paribus, an increase in the optimum population of the economy would lead to a reduction in the income per head.
The Theory of Demographic Transition
NeoMalthusian Theory (Coale- Hoover, 1958)
The optimistic theory

Theory of budget deficit
Keynesian theory
This theory was proposed by a British economist, John Maynard Keynes during the great depression in his book, “the general theory of employment, interest and money” in 1963. The Keynesian economists believed in the active participation of the government in the market. They explained that in order to curb inflation or regulation depression, the government has to use the tools of fiscal and monetary policy.
The Keynesian economists, unlike the classical economists, believed that government should run an unbalanced budget in order to boost the economy. To them, during periods such as the great depression, it is totally appropriate for the government to incur more expenses in order to stabilise the economy. Keynesian advocated for an increase in government expenditures and decrease in taxes to stimulate demand therefore improving economic growth.
Classical Theory
Adam smith is been referred to as the father of this theory. His followers include David Ricardo, John Stuart Mill and the Reverend Thomas Malthus. The classicalists believe in free markets. They believe that all market should be controlled by the invisible hand of demand and supply. They do not believe in the intervention of the government in the market. The classicalists believe that if the market is left in the hands of private individuals, the personal interest being pursued by each of this individual would end up securing the general interest of the whole society.
As per the established hypothesis of the classical theorists, government deficit financing is to a large extent affected by the crowding out effect of deficit financing on private market investment, and by augmentation, brings down the level of economic growth. Notwithstanding the crowding out impact on private venture, the general public would now have to bear the weight of increment in government debt as a result of the expansion in deficit financing as government would be look for new ways to counteract this crowing out effect. This restriction to deficit financing with respect to the classical analysts depended on the presumption of full employment. Clearly, if there is as of now full employment, any additional consumption financed by debt or by readily available cash will undoubtedly make inflationary ascent in costs. In aggregate, as per classical theorist’s hypothesis, unreasonable deficit financing can prompt poor economic growth and development.
Theory of growth
Neoclassical growth theory
The neoclassic just like the classicalists’ believe in a free market. They kick against every form of government participation and embrace every form of liberalisation. They believe that the market should be left in the hands of the capitalists and government intervention should be minimal. Government only intervenes when it would be to the benefit of the market.
The basic model under the neoclassical theories is the Solow-Swan model which is simply called the Solow model. This model was developed in 1956 by two economists, Robert Solow and T. W. Swan. This model lays emphasis on savings, investment and population growth as important determinants to economic growth. This theory believes that economic growth is as a result of increase in quantity and quality of labour (this explains population growth and human capital development), increase in capital (this occurs through savings and investment), and improvements in technology.
According to this school of thought, economic growth can be boosted by increase in population and also through human capital development. They are of the belief that an increase in population translates to an increase in labour force which ultimately means an increase in output which leads to an increase in the size of the domestic market. To them, to increase such output faster, the ever increasing population must be well qualified; this means that the quantity of the population is not enough. It might be a necessary condition but it is definitely not a sufficient condition. The sufficient condition is producing a quality population which is usually carried out through knowledge acquisition.
Endogenous growth theory (New Growth Theory)
This theory emphasizes on the fact that growth in an economy is as a result of its endogenous (internal) activities. It emphasises on technological progress and human capital as a means of boosting output. This theory believes that the differences in per capita income among different countries is as a result of the differences in human capital possessed by these countries. To the new growth theorists, human capital is a factor of production which influences growth.
Unlike the classicalists that believe in only physical stock of capital, the neoclassic and the endogenous growth theories believe that the stock of capital in any economy could be maybe up of both human and physical capital because both influences growth. To the new growth theorists, a higher stock of human capital would imply a higher innovation rate which leads to growth rate of productivity and output growth.
EMPIRICAL LITERATURE REVIEW
It is the earnest desire of every economy to grow. With the increase in their population, they desire a more than proportionate increase in their real GDP. This is to ensure that everyone in the nation is being carried along and the nation not only grows, but also develops.
With the rising increase in the population of the Nigerian economy, there is also an increase in its government expenditure. This increase stirs towards meeting up with the economy’s rising population. The question is with the rising population and rising deficit financing, is there a make-up in its development of its human capital? Is the nation’s GDP being accounted for? Is there a relationship between the nation’s rising population and human capital development?
Most developed nations notice that a population causes an increase in its government expenditure as they are fully aware that for their nations GDP to be well accounted for, their human capital must be well developed and the basic areas where such development is covered is in its education and health. The government, in a bid to ensure that both education and health services get to everyone in the society, increase their expenditure. With the increase population which leads to an increase in human capital development comes an increase in government expenditure and therefore a subsequent increase in its real GDP.
Unlike the developed nations, the cases of the underdeveloped or developing nations is quite different. Taking Nigeria as a case study, we can see that the population increases by about 2.5 percent every year with a more than proportional increase in government expenditure which forces the government to run a deficit form of financing its budget. The increase in the real GDP of the economy is obvious but there is a clause. This clause is as a result of a less than proportionate increase in the human capital development of the economy.
To explain this analysis better, we would base this section of the study on literature reviews.
Empirical literature review on impact of population growth and human capital development on economic growth in Nigeria.
International Literature Review
Researchers, based on this twenty-first century topic, have come up with different analysis as to whether or not there is a positive impact of population and human capital development on budget deficit and economic growth of various economies, developed and developing nations alike.
Tewodros (2014) carried out a research on the relationship between human capital development and economic growth in the Ethiopian economy. He gathered that there is a significant positive relationship between human capital development and economic growth. He explained in his analysis that a long term investment on the human capital indicators (education and health) would foster economic growth. In essence, with an increase in population, government should ensure to create an environment that would lead to between education and health care which would further foster economic growth. This environment can be achieved through deficit financing.
According to Sher Ali et al (2013), who carried out a research on population growth and economic growth in Pakistan, he explained that population growth impacts positively on economic growth. This analysis differs from that of Afzal who carried the same research in the same country in 2009. Afzal got an opposite result as he claimed that population growth impacts on economic growth negatively.
The difference between the parameters adopted by both Afzal and Ali et al were human resource development, trade openness, and unemployment rate used by Ali et al which were ignored by Afzal; and the use of foreign investment growth, export growth, and private consumption as a percentage of GDP used by Afzal and ignored by Ali et al. To Ali et al, population growth is not sufficient enough to boost economic growth. Human resource development is also needed.
Bas Van Leuwen explained that human capital has suffered from three main problems in growth theories. These problems include the diverse use of human capital variable sin various research which has caused researchers to employ different variables to measure human capital; the problem of how best to insert the human capital variables into equations of various growth theories; and finally is the problem of change in the relationship between human capital and economic growth among various countries.
IMF (1995) carried out a research on growth in sub-Saharan Africa and concluded that lowering the budget deficit is beneficial to economic growth but cutting government investment to reduce budget deficit is counterproductive. Thus, other means of lowering the budget deficits is highly recommended. They also believed that increase in government expenditure on education and health of the citizens would help to raise human capital development and therefore contribute to growth, both directly and also indirectly by slowing down population growth.
Domestic Literature Review
Adediran (2012) in his study on the effect of population growth to economic development in Nigeria, exerted that population growth has a significant and positive relationship to the economic growth of Nigeria. He used the real GDP and Per Capita income (PCI) as proxies for economic development and population growth respectively.
In the research carried out by Ogujiuba Kanayo in 2013, he explains that the human capital development of Africa is the lowest among all other nations of the world. He revealed that human capital development has a positive impact on economic growth. Also, with the ever rising increase in the population of Nigeria, if the Nigerian government can focus on improving the nation’s human capital development index, which include health, education and income per capita, it would relate positively with economic growth by increasing the nation’s real GDP. He also stated that there should be equality with the physical and capital stock of the nation.
A group of researchers from the University of Nigeria, Nsukka and the Federal college of Eductaion Asaba, combined and undertook a research based on the Nigerian experience of human capital development and economic growth. They concluded that there is a significant and positive relationship between human capital development and economic growth in Nigeria. They recommended that Nigeria increase the quality of investment of human capital development and also the stock of fixed capital.
Akpokerere and Oboro (2016) asserted that in Nigeria, government expenditure on health and education has not helped much in improving the economic development in the country. They also believe that the educational sector of any economy is the key to the wellbeing of such an economy. In their research, they believe that the Nigerian government has not done enough to improve the quality of her educational and health sector which has seriously had an adverse effect on the economy’s output.
Oluwatobi and Ogunrilola (2011) from the result of their study discovered between the stock of human capital and the level of real output, there exists a statistically significant but negative relationship. Dabalen, Oni, and Adekola (2000) sited in Oluwatobi and Ogunrilola (2011) explained that most employers complain that Nigerian graduates are not well prepared for the employment industry. Also, they believe that the academic standards in the country have fallen by a considerable amount thereby making most Nigerian university degree holders mere certificate holders as opposed to being competent and skilled manpower resources.
Empirical literature review on impact of population growth and human capital development on budget deficit in Nigeria.
Domestic Literature Review
Dagwom (2016), in his research on the empirical analysis of budget deficit and human capital development in Nigeria, explained that following the Keynesian theory, there is a causal relationship between the two variables in which budget deficit causes human capital development in the long run. To check for the dynamic causality between the two variables, he employed the vector error correction (VEC) model thereby using Wald statistics and significance of error correction term. He explained that in his analysis, there was no short-run relationship between the two variables.
Korgbeelo and Nwaeke (2016) analysed that budget deficit financed through external sources where insignificantly and negatively related to economic growth. While that financed through domestic sources where significantly and positively related to economic growth. He explained that with the increase in population, unemployment is also on the increase and deficit financing financed through external borrowing has a negative impact on unemployment while that financed through internal funding is positively related to unemployment in the country.