© 2020 |Published by Scholars Middle East Publishers, Dubai, United Arab Emirates 490 Saudi Journal of Economics and Finance Abbreviated Key Title: Saudi J Econ Fin ISSN 2523-9414 (Print) |ISSN 2523-6563 (Online) Scholars Middle East Publishers, Dubai, United Arab Emirates Journal homepage: http://saudijournals.com/sjef/ Original Research Article Investment in Education and Health: Lessons for the Growth Potentials in the COVID-19 Era Ubong E. Effiong * Department of Economics, University of Uyo, P.M.B. 1017, Uyo, Akwa Ibom State, Nigeria DOI: 10.36348/sjef.2020.v04i10.002 | Received: 27.09.2020 | Accepted: 12.10.2020 | Published: 16.10.2020 *Corresponding author: Ubong E. Effiong Abstract The negative effect of the Covid-19 pandemic on the growth potential of the economy, as it affects the health and educational sector serves as an inspiration for this paper to examine the effect of government expenditures on education and health on the economic growth of Nigeria. The study utilized data from the Central Bank of Nigeria statistical bulletin, World Development Indicators, and the Nigeria Centre for Disease Control (NCDC). The dependent variable was gross domestic product, while the explanatory variables include gross fixed capital formation, labour force, and government expenditure on education, government expenditure on health, broad money supply, inflation rate, and exchange rate. The data were analysed using the Bounds test for cointegration and error correction mechanism to investigate both the short run and long run relationship. The Bounds test revealed the existence of a long run relationship between government expenditures on education and health and economic growth. Further, the error correction model revealed that both government expenditures on education and health exert positive and significant effect on economic growth both in the short run and in the long run. The coefficient of the error correction term (0.5833) indicates that 58.33% of the short run disequilibrium is corrected annually. The paper concludes by stating that Nigeria needs to invest massively on the education and health sector so as to make provisions for the necessary infrastructures that could be required for their smooth operations in this period of global pandemic and beyond. Keywords: Economic Growth, Human Capital Development, Government Expenditures, Co-integration, Education, Health, Covid-19. Copyright © 2020 The Author(s): This is an open-access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY-NC 4.0) which permits unrestricted use, distribution, and reproduction in any medium for non-commercial use provided the original author and source are credited. INTRODUCTION The role of the government in promoting economic growth was pronounced right from the mercantilist doctrine of trade protectionism until the classical economist led by Adam Smith pronounced and promoted laissez faire economic system. This doctrine gained weight over centuries until the Great Depression of the 1930s forced a new dimension to the management of the economy. The Keynesian revolution therefore gained weight and prompted the role of the government in managing the economy through aggressive spending in the time of depression and a reduction in such spending in the time of boom. This economic management practices have been described as fiscal policy to economic management. The role of the government in promoting economic growth in the country cannot be overemphasised though the classicalist described its role as being inefficient and wasteful. The government on her part can employ strategic expenditure on crucial aspect of the economy so as to derive the desired benefit. Based on the human capital development perspective, government expenditure on human capital development is far more beneficial than investment in physical capital thus; expenditures on education and health are keen to promoting sustainable economic growth in a country. Education and health are crucial for a nation’s sustainability. Taking education for instance, it is the mental skills that are transferred to the creation and operation of physical capital hence, human intelligence is duly transferred to machines before a functional operation can be achieved. Education is crucial in the development of any society. As noted by [1], improving the education of people is not only a goal in itself for a better quality of life but also its positive impact on the economic development of a country is far-reaching. Also, education remains an end in itself and a means for achieving other goals of development like economic