Abstract:
A nation's socio-economic growth depends on its level of investment in the education
and health of its population. Thus, human capital development is central to the
government's policy agenda, as manifested by the massive budgetary allocations in
education, vocational training, and health care. Though previous studies have reported
tremendous improvement in the quality of human capital in developed countries, over
the past four decades, the level of human capital development in Sub-Saharan African
remains unsatisfactory mainly because of budgetary constraints. Interestingly, the
region receives a fair share of foreign capital transfers such as foreign direct investment,
migrants' remittances, and official development assistance. Therefore, the main
objective of this study was to assess the impact of foreign capital flows on human
capital development in Sub-Saharan Africa (SSA). The specific objectives were to
determine the effect of foreign remittance, official development assistance and foreign
direct investment on human capital development in Sub-Saharan Africa. The study was
grounded on the human capital theory, dependency theory and modernization theory.
The study used an explanatory and descriptive research design. Secondary data was
employed and analyzed using multiple regression analysis, and the results of the
Hausman test guided the choice between fixed effect and the random effect. The study's
findings showed that foreign remittances had a positive and significant impact on
human capital development (β= 0.0036, ρ<0.05).Conversely, the effect of foreign direct
investment (β=-0.0013, ρ<0.05) and official development assistance (β= -0.0026,
ρ<0.05) was negative and significant. Therefore, the study concludes that the impact of
foreign capital on human capital development in SSA varies depending on the type of
external capital. The study recommends that Sub-Saharan African nations formulate
necessary policy interventions to leverage foreign capital to improve their level of
human capital development. Specifically, there is a need to strengthen the institutions
of governance and invest more in human capital formation since they determine the
magnitude of external capital inflow and a country's absorptive capacity.
