THE DEVELOPMENT IMPACT OF HIGHER EDUCATION IN NIGERIA

Department of Economics School of Arts and Sciences Strayer University, Virginia, USA Department of Economics Division of Social Sciences and Business Prince Georges Community College, USA a Corresponding author: lloyd.amaghionyeodiwe@strayer.edu
Ontario International Development Agency ISSN: 1923-6654 (print) ISSN 1923-6662 (online). Available at http://www.ssrn.com/link/OIDA-Intl-Journal-Sustainable-Dev.html

Lloyd Ahamefule Amaghionyeodiwe a, Tokunbo Simbowale Osinubi b

Abstract: Education in Nigeria is more of a public enterprise that has witnessed government complete and dynamic intervention and active participation (Federal Republic of Nigeria, 1981). It is the view of the formulated education policy in Nigeria to use education as a vehicle in achieving national development. Education being an instrument of change, in Nigeria education policy has been a product of evolution through series of historical developments. Improving the education 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. The provision of education is a key element of a policy to promote broad-based economic growth. The main asset of the poor is clearly their labour and education improves the productivity and earnings of workers. Education is considered a major remedy for many problems faced by developing countries. For example, high fertility rates are adding to population pressures in several countries. From a global perspective, economic and social development is increasingly driven by the advancement and application of knowledge. Education, in general, and higher education in particular, are fundamental to the construction of a knowledge economy and society in all nations (World Bank, 1999). Yet the potential of higher education systems in developing countries to fulfil this responsibility is frequently thwarted by longstanding problems of finance, efficiency, equity, quality and governance. As a result, developing economies cannot be said to be reaping the benefits

of a knowledge economy. It, therefore, become imperative with the aid of the Earnings Model developed by Mincer (1974) which is founded on the Theory of Investment in Human Capital, as well as the model by Moretti (2002) for social returns to education, to assess the development impact of higher education in Nigeria with a view to establishing the link between Nigerias higher educational system and her economic growth, as well as explicating how Nigeria can participate in the global knowledge economy. The result also reveals that a well educated labour force possessed a positive and significant impact on economic growth through factor accumulation and on the evolution of total factor productivity. Also, the amount of government expenditure on education significantly influences output per worker growth. INTRODUCTION rom a global perspective, economic and social development is increasingly driven by the advancement and application of knowledge. Education, in general, and higher education in particular, are fundamental to the construction of a knowledge economy and society in all nations (World Bank, 1999).1 Yet the potential of higher
1

See William Saint, Teresa A. Hartnett and Erich Strassner, Higher Education in Nigeria: A Status Report, Higher Education Policy, 2003, 16, p. 260. www.worldbank.org/afr/teia/he_nigeria_status.pdf

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education systems in developing countries to fulfil this responsibility is frequently thwarted by longstanding problems of finance, efficiency, equity, quality and governance. These old challenges have now been augmented by new ones linked to the growing role of knowledge in economic development, rapid changes in telecommunications technology, and the globalization of trade and labour markets (Salmi, 2001).2 As a result, developing economies cannot be said to be reaping the benefits of a knowledge economy. This is because the capacity to generate and harness knowledge in the pursuit of sustainable development and improved living standards is not spread equally among nations. In fact, many developing countries might neither have articulated a development strategy linking knowledge to economic growth (and development) nor built up their capacity to do so. The aim of this study is, therefore, to assess the development impact of higher education in Nigeria with a view to establishing the link between Nigerias higher educational system and her economic growth, as well as explicating how Nigeria can participate in the global knowledge economy. The study is initiated on the basis of the Methodological Workshop on the Development Impact of Higher Education in Africa held in Dakar, Senegal in September 2005. The workshop was organised by the United Nations African Institute for Economic Development and Planning (IDEP) in Dakar, Senegal with the aim of designing an acceptable and unified methodology among selected researchers to carry out the study (See IDEP Report).3 Objectives of the Study The overriding objective of the study is to assess the development impact of higher education in Nigeria. More specifically, the study will: (a) examine if there exists a causal link between higher education (HE) and economic (growth and) development; (b) investigate the private and public levels of (returns to, and) profitability of HE in Nigeria; (c) determine the cost of higher education and who are those bearing the cost in society (d) find out whether HE policy in Nigeria promotes social equity Methodology The methodology of the research work will necessarily involve two levels of analysis: Micro- and Macro- analysis. The micro-analysis will look at the private returns/profitability of higher education
2 3

including the probability of employment while the macro-analysis will look at issues as social returns, productivity, neighbourhood effect, growth, internal rates of returns, etc. Standard models will be applied to the research work, particularly the Mincer Earnings Model4, but with some modifications pertaining to peculiarities in the Nigerian economy and educational system. Scope of the Study The study will focus on the impact of the higher educational system in national development. Higher education, in this context, is set at post A-Level (or Baccalaureate) education and beyond.5 In Nigeria, the National Policy on Education (NPE, 1998: Section 6) equates higher education with tertiary education, defining it as education given after secondary education in universities, colleges of education, polytechnics, monotechnics etc. This definition will, therefore, delimit the study as it pertains to education in Nigeria. LITERATURE REVIEW The Role of Higher Education6 Education in general and higher education in particular, are fundamental to the construction of a knowledge economy and society in all nations (World Bank 1999). Yet the potential of higher education systems in developing countries to fulfill this responsibility is frequently thwarted by longThe Earnings Model developed by Mincer (1974) is founded on the Theory of Investment in Human Capital. The model identifies a relationship between schooling, earnings and post school investments in human capital. See Helle Bunzel, From Economic Model to Econometric Model (The Mincer Model) www.econ.iastate.edu/classes/ econ671/Bunzel/documents/Mincer05slides.pdf 5 It is important to note that the dimension (and scope) of higher education differs across countries, hence, the concept of post A-Level (or BAC) education will serve both as a minimum bench-mark and an appropriate working definition for the higher education in African countries where this study will be undertaken. 6 This paper realizes that in discussing the developmental impact of higher education on the Nigeria economy, one cannot by-pass the contributions of Nigerian scholars (as it relates to universities) whose contributions, (though not well documented in the literature), have significant economic consequences. A closer study to this was Oluwatobi, (2007) whose study was an appraisal of contributions of academic staff union of universites (ASUU) as a trade union to educational development in Nigeria.
4

Ibid. Methodological Workshop on the Development Impact of Higher Education in Africa, September 29th -30th, 2005.

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standing problems of finance, efficiency, equity, quality and governance. Now, these old challenges have been augmented by new challenges linked to the growing role of knowledge in economic development, rapid changes in telecommunications technology, and the globalization of trade and labor markets (Salmi 2001). Knowledge has become the most important factor for economic development in the 21st century. Through its capacity to augment productivity, it increasingly constitutes the foundation of a countrys competitive advantage (Porter 1990). This change is most evident in OECD countries, where investments in the intangibles that makes up the knowledge base of a country (e.g., research and development, higher education, computer software, patents) equal or even exceeding investments in physical equipment (OECD 2001). Developing economies, while affected by these transformations, are not yet reaping their benefits. This is because the capacity to generate and harness knowledge in the pursuit of sustainable development and improved living standards is not spread equally among nations. In contrast, many developing countries have neither articulated a development strategy linking knowledge to economic growth nor built up their capacity to do so. Nigeria is one of these. Although it is Africas largest country with 20 percent of the regions population, Nigeria has only 15 scientists and engineers engaged in research and development per million persons. This compares with 168 in Brazil, 459 in China, 158 in India, and 4,103 in the United States (World Bank 2002). In recent years, the economic success of newly industrializing nations (e.g., the "Asian tigers") has been linked to substantial prior investment in human resources. These strategic investments, together with particular institutional and policy choices concerning the nature of the university system, the extent of intellectual property protection, the historical evolution of industrial R&D organization, and the division of labor between private industry, universities and government in R&D performance and funding combine to form what is called a national innovation system (Nelson 1993) Research suggests that public policy plays an important role in shaping national innovative capacity by determining human capital investments and creating incentives for innovation. Countries that have increased their innovative capacities have invested heavily in science and engineering education, and also in promoting competition as the basis for innovation (Stern et al. 2000). Technical education is substantially neglected by policymakers and oriented to the teaching of traditional hand skills that are often divorced from

labor market requirements. Higher education enrolls a very modest 4% of the relevant age cohort. This level compares poorly with economic competitors such as South Africa (17%), India (7%), Indonesia (11%) and Brazil (12%) (Task Force, 2000). The elements of a national innovation system are clearly not yet in place. In this, politics has played a part. Between 1990 and 1997, for example, the real value of government allocations for higher education declined by 27%, even as enrollments grew by 79%. The result was a precipitous fall in the quality of university education and research, as implied by the 62% drop in the real value of recurrent expenditure per student during this period (Hartnett 2000). Downward pressure on staff salaries, together with deteriorating working conditions and political repression on campus, generated a series of staff and student strikes during the 1990s, culminating in yearlong closures of the university system in 1992 and 1996 (Oni 2000). Meanwhile, growing corruption and human rights abuses by the regimes in power provoked international sanctions that made overseas travel by Nigerian citizens difficult. One unintended outcome of this ostracism was to isolate the country, including its universities, from global intellectual currents and access to knowledge during much of the 1990s. In terms of spending on research, available data indicate low levels of investment in research capacity and education, and help to explain why the country's non-oil economy has remained consistently sluggish during a decade of international economic expansion. On the research side, Nigeria's number of scientific publications for 1995 was 711, significantly less than its output of 1,062 scientific publications in 1981 by a comparatively much smaller university system (Task Force, 2000). In contrast, scientific publications were 3,413 for South Africa, 14,883 for India, 310 for Indonesia, and 5,440 for Brazil (Task Force, 2000). The countrys low research output probably reflects the low priority accorded to research and development by government decision-makers. For example, Nigeria's federal university system spends only 1.3% of its budget on research (Hartnett, 2000). Public Sector Provision and Financing of Higher Education in Nigeria Improving the education 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 farreaching. The provision of education is a key element of a policy to promote broad-based economic growth. The main asset of the poor is clearly their labour and education improves the productivity and earnings of workers. Education is considered a major remedy for many problems faced by developing countries. For example, high fertility rates are adding to population

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pressures in several countries. It is widely accepted that female education helps to lower fertility rates. Moreover, educated parents are in a better position to look after the education and health needs of their children. The public sector is still a major provider of education in developing countries. The public provision of education may be considered using rights-based and needs-based approaches. Owing to the limited resources of governments in developing countries, the universal provision of education is almost impossible. One of the major problems now facing the Nigerian universities is the problem of under-funding. This is not surprising considering the fact that in the recent time, government revenues have reduced sharply, while the national economy itself is in total chaos. The government, which statutorily bears the costs of higher education in the country, now faces tight budget constraints due to the collapse of the oil market, and the need to meet heavy and rising debt service obligations. During the period 1980 - 92, real federally collected revenue at 1980 prices, net of external debt service obligations, declined from N14, 925 million to N12, 886 at an average annual rate of 2.2 per cent (Taiwo, 1994). Government priority to education is now very low, while funding of university by the government is declining fast (Oduleye, 1985). The structural adjustment programmes subsequent to Nigerian economic crises have further shrunk government funding of university education. Before SAP, the Nigerian University could be said to be in a state of boom. In fact, facilities that existed in the Universities were at par with what existed in other parts of the world (Eisemon, 1980). The real impact of SAP cannot be estimated because of "notoriously weak" data on official expenditures (Cooper, 1990). The problem of under-funding in the Nigerian universities has resulted in the curtailing of research activities. The economic deterioration even started shortly before SAP, hence SAP alone cannot be held totally responsible for the pitiable situation in Nigerian Universities. Other contributory factors to the under-funding of Nigerian universities include lack of adequate planning, proliferation of Universities, and ad hoc expansion of enrolment, academic versus non-academic employment ratio etc. The real impact of SAP can only be appreciated when it is understood that the provision of higher education in Nigeria is the total responsibility of governments. This is to ensure that African universities are prevented from becoming centres of nationalistic and ethnic agitation (Eisemon and Davis, 1990). Thus direct costs of higher education are borne by the government.

With the increased budgetary restrictions of SAP and the depreciation of the Naira, the provision of scientific and teaching materials have been drastically curtailed. Quality of teaching has fallen considerably, the libraries are full of out-dated books and journals and the morale of staff is at its lowest ebb. Allocations to the Universities were grossly inadequate while student enrolments continued to rise. Capital projects to meet the expanding programmes could not take off or in cases where they took off they had to be abandoned due to lack of funds. The by effects of dwindling finances in the Nigerian university system is explicated in many adaptive mechanisms such as: (a) Curtailment of laboratory/practical classes, (b) Limited number of field trips, (c) Curtailment in the attendance of academic conferences, (d) Curtailment of the purchase of library books, chemicals and basic laboratory equipment, Freezing of new appointments, (a) Virtual embargo on study fellowships, and (b) Reduction in research grants among others. Since these steps have not brought about significant improvements, attention has now turned to alternative sources of funding. According to Fadare (1983), the Federal Government has starved the Universities of funds, providing 51.8% less than the UNESCO recommendation. He went further to explain that even when the University's requests were based on the NUC parameters, the difference between requests and grants ranged between 25% and 54% in five years. He concluded by saying "... it is clear that concerted efforts are being made by some bureaucrats to strangulate all the past efforts that have been put into the higher education system. In fact, by the present mode and level of funding, it is abundantly clear that higher education will suffer from malnutrition thereby debasing the quality of education, and of course, some of the institutions will collapse or die a natural death." The inadequate funding of the Universities has, no doubt, had calamitous effect on teaching and research and Universities have been forced to embark on income generating projects in order to source for funds. Kumuyi and Igwe (1988) interpreted this as the positive impact of SAP on these teaching and research institutions. According to them, such steps were policy guidelines meant to promote selfreliance. The different ways of generating income have been identified to include the following: (a) Tuition and education levy; (b) Commercial ventures and consultancy services; (c) Load shedding without change in ownership structure; and (d) Privatisation through divestiture and regulation.

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ENTREPRENEURSHIP PRODUCTIVITY

SPECIALIZATION PRIVATE

JOBS

Increased Spending

Economic Growth Sustained Economic Growth

Higher Education Tax Revenue

Poverty Reduction

R&D FDI PUBLIC GOVERNANCE SAFETY SOCIAL DEVELOPMEN T

Source: Adapted from Bloom, Canning, and Chan (2005) Figure 1: Conceptual Framework Tuition and education levy is borne by those who benefit directly from university education. The individual student pays tuition, while education levy is borne by the private sector for the direct benefits of manpower from the universities. Thus, personal and corporate income taxes can be imposed, with the proceeds being used by the universities. Part of the agreement which the Academic Staff Union had with the government in 1992, is that education levy be imposed on corporate bodies at the rate of 2 per cent of profit. Notably, tuition was paid in Nigerian universities up to 1977, which accounted for over 10 percent of the university budget. The issue of tuition in Nigerian universities has become a major political issue in the recent time, and even though this is considered imperative at different quarters, the implication of such for university governance is high. Introducing tuition back into the Nigerian universities would have wide implications, which need critical assessment. Many of the Nigerian Universities now engaged in different commercial ventures (hotels, printing press, petrol stations, bookshops) and consultancies. The performance of such ventures (like other public enterprises) has been very poor, and sometimes it conflicts with the objectives of university education teaching and research. It is important to be able to quantify the preconditions for success and the implications of these for teaching and research. Also, the allocation of government funds to universities is currently based on student enrolment, what will be the implication of a reduction of student enrolment on the respective universities? In 1990, the

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Federal Government of Nigeria signed an agreement with IDA for $120 million credit facility for use by all the Federal Universities. This credit was to be used to revitalise research and teaching activities, which as stated earlier, had remained dormant in the 20 Federal Universities. The money was to be disbursed in 3 stages between 1990 and 1993 and some conditionalities were spelt out that should be fulfilled before the Universities can utilise the funds. There were delays in meeting up with the eligibility criterion and thus the project did not take off until 1993 and the project was to last till December 1996. Up to (April 1996) 214,233 volumes of library books have been supplied to the Universities. In addition teaching and Research Equipment including spare parts were delivered to the Universities. The supply of journals has resumed, and under an aspect of the project which is Staff Training, 350 University staff and 45 NUC Staff were trained. But can all these gains be sustained under the prevailing situations in the country? Ishola (1996) was of the view that the Federal government would find it difficult to keep up the momentum created by this project. How long then can one continue to depend on others to finance our higher educational system? MacGregor (1995) in her South African study aptly described this pattern as "dancing with borrowed shoes". From all indications, the Nigerian government lacks the funds to provide the capital project and the supporting infrastructure needed to maintain and sustain the equipment. For example, in most universities, the water supply is inadequate and the electricity supply is irregular. Without steady water supply, Ishola (1996) went on, most of the laboratory equipment procured cannot be used and without a regular power supply, some experiments cannot be effectively performed. Again, unless the books and journals are properly housed, they are prone to hazards such as physical damages and even pilfering by unscrupulous persons. In line with this argument, there is still need for the Federal government to come up with some funds, which from all indications are not available. Recently, the government has introduced the Education tax on all companies, which has yielded considerable profits. But how the money would be allocated between the primary, secondary and tertiary education is yet to be determined. In a recent study, Babalola et al (1996) identified many of the core problems, which continue to face financing of higher education in Nigeria. This study found among others, that there are overspending on general administration, general academic and retirement benefits; all at the expense of research and public service. To increase the average expenditure on research and public service, Babalola et al suggested a reduction in unit administrative supports

costs (for example, the costs of staff salaries, especially non-academic staff; the goods costs per student; the curriculum costs etc.). Thus, this study was in support of mobilising for non-NUC grants (that is, in form of endowments, external aids and engaging in income-generating activities). However, they also cautioned on the demands imposed by income-generating activities on the various aspects of university management, and the trade-offs between research and teaching. Many of the unanswered queries raised by Babalola et al (1996) remain the focus of the present study. The problem of financing higher education is not peculiar to Nigeria. In the United States, as far back as the seventies (based on the 1974 Report of the National Commission on the financing of Post Secondary Education), students and parents were to account for 20% of funding. State and local government were to account for 32%, Federal Government, 27%; Endowment and Private Philanthropy, 9%; and auxiliary enterprises and other activities, 12%2*. To cope with government funding reductions in Canada, Grier (1995), during his tenure as a President of Canadian University, commented on the need to launch a major private funding campaign. Tuition fees had to rise by fifty percent in the last five years, so that they comprise, on average, about twenty-five percent of university revenues. According to him, this private fund raising has become permanent solicitations of alumni corporations and foundations. He stressed that corporate giving has up to now been exclusively devoted to capital items such as buildings, scholarships, professorships, equipment; annual contributions from alumni, in the right circumstances, be directed to annual operating expenses. But as private funding becomes more and more significant, he observed that there are frequent misgivings at Senate, Faculty and Councils about its potential distortion of the university's mission. For the donors not only want lasting recognition such as naming, but want a hand in defining the project and shaping its design (which may not be in line with university policies). What is the situation here in Nigeria? Is the private funding attracting Universitys mission? Daniel (1995) identified the pressure of numbers as a major problem of higher education in Ghana. The central problem thus facing Ghana universities is how to generate additional resources to cope with such numerical expansion. But remarked that the resort to consultancies is a means of generating alternative income. Some kinds of consultancy work have begun to divert effort from the fundamental research, which is the mission of many of the Institutes. This situation calls attention to caution. But what other options do these higher institutions have under the prevailing

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circumstances? What will be the effect of all these on the main objectives of the University? For instance, what will be the implications of privatising some of the existing universities, and even encouraging the establishment of more private universities? No doubt, privatising university education has implications for the quality of education received, and the cost of such education. The Conceptual Links from Higher Education to Economic Growth7 Higher education has positive effects on economic development. These effects are illustrated below in figure 1. The figure shows that higher education can lead to economic growth through both private and public channels. The private benefits for individuals are well established, and include better employment prospects, higher salaries, and a greater ability to save and invest. These benefits may result in better health and improved quality of life, thus setting off a virtuous spiral in which life expectancy improvements enable individuals to work more productively over a longer time further boosting lifetime earnings. Public benefits are less widely recognized, which explains many governments neglect of tertiary schooling as a vehicle for public investment. But individual gains can also benefit society as a whole. Higher earnings for well-educated individuals raise tax revenues for governments and ease demands on state finances. They also translate into greater consumption, which benefits producers from all educational backgrounds. In a knowledge economy, tertiary education can help economies keep up with more technologically advanced societies. Higher education graduates are likely to be more aware of and better able to use new technologies. They are also more likely to develop new tools and skills themselves. Their knowledge can also improve the skills and understanding of nongraduate co-workers, while the greater confidence and know-how inculcated by advanced schooling may generate entrepreneurship, with positive effects on job creation. Tertiary schooling can also have less direct benefits for economies. By producing well-trained teachers, it can enhance the quality of primary and secondary education systems and give secondary graduates greater opportunities for economic advancement. By training physicians and other health workers, it can improve a societys health, raising productivity at work. And by nurturing governance and leadership skills, it can provide countries with the talented

individuals needed to establish a policy environment favorable to growth. Although none of these outcomes is inevitable, the framework presented in Figure 3 does suggest many possible routes through which higher education can benefit economies. Some of the evidences in this regard include: (a) In a cross-sectional study, Barro and Sala-i-Martin found that male educational attainment, particularly secondary and tertiary education, had significant positive growth effects. An increase in average male secondary schooling of 0.68 years raises annual GDP growth by 1.1 per cent a year, while an increase in tertiary education of 0.09 years raises annual growth by 0.5 per cent a year. They find an interaction between initial GDP and human capital (broadly defined, including health and education), so that countries that lag behind tend to grow faster if they have high levels of human capital. (b) In a time series analysis of the United Kingdom, by Jenkin (1995). His study looked at an index of total factor productivity and its relationship to different levels of educational attainment. When higher education qualifications (including undergraduate, postgraduate, and other tertiary graduate stock) increased by 1 per cent, annual output grew between 0.42 and 0.63 per cent. (c) A study by Lin (2004) in Taiwan showed that higher education played a strong role in the countrys economic growth. It found that a 1 per cent rise in higher education stock (as defined by those who had completed higher education, including junior college, college, university, or graduate school) led to a 0.35 per cent rise in industrial output, and that a 1 per cent increase in the number of graduates from engineering or natural sciences led to a 0.15 per cent increase in agricultural output. This work examined the effects of concentration in different disciplines and concluded that study of the natural sciences and engineering had the largest effect on output. (d) Wolff and Gittleman (1993) showed that university enrollment rates are correlated with labor productivity growth. The number of scientists and engineers per capita is also associated with economic growth. (e) In a study of six developed countries, De Meulemeester and Rochat (1995) showed that higher education had a strong causal impact on economic growth in Japan, the United Kingdom, France, and Sweden, but no impact in Italy and Australia. They conclude that higher education is necessary for growth but not sufficient. It is vital, they argue, that the social, political, and economic structures and the technological level of the society to which the educational system belongs are such that graduates can actually make use of their accumulated knowledge. (f) Bloom, Hartley, and Rosovsky (2004) showed that college graduates in the US had

See Bloom, Canning, and Chan (2005)

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higher productivity and earnings than non-graduates. Moreover, workers in US states where the proportion of college graduates is high earn significantly more than those in states with few graduates, whether or not they have received a tertiary education themselves. Unfortunately, we know of no comparable study investigating such spillovers in developing countries. Their study further found a positive and statistically significant correlation between higher education enrollment rates and governance indicators, including absence of corruption, rule of law, absence of ethnic tensions, bureaucratic quality, low risk of repudiation of contracts by governments, and low risk of appropriation. (g) Another channel for improvement is through research and development, which can boost economic growth and productivity growth. Lederman and Maloney (2003) conducted a crosscountry regression analysis that showed that the rate of return on R&D was 78 per cent. BACKGROUND TO THE STUDY Evolution of Higher Education System in Nigeria The objectives of tertiary education in Nigeria, as contained in Section 6 of the National Policy on Education (NPE, 1998), defines tertiary education as education given after secondary education in universities, colleges of education, polytechnics, monotechnics etc. It specified the following goals: (a) Contribute to national development through high-level relevant manpower training. (b) Develop and inculcate proper values for the survival of the individual and the society. (c) Develop the intellectual capability of individuals to understand and appreciate their local and external environments. (d) Acquire both physical and intellectual skills, which will enable individuals to be self-reliant and useful members of the society. (e) Promote and encourage scholarship and community service. (f) Forge and cement national unity and promote national and international understanding and interaction. The goals show that tertiary education institutions should embark on teaching, research and development of programmes and maintain minimum educational standards. They should also seek interinstitutional co-operation and dedicated service to the community. The establishment of Yaba Higher College in 1932 marked the beginning of higher education in Nigeria. The purpose was to produce assistants who would relieve colonial administrators of menial tasks. Due to problems in admission and administration, the Colonial Government then set up the Elliot Commission to specifically examine the principles which would guide the promotion of higher

education, learning and research and the development of universities in the Colonies. The commission included three West Africans who traveled extensively for three months and later submitted two reports. The majority reports recommended that a University College should be set up in Nigeria, Gold Coast now Ghana and Sierra Leone, etc. Accordingly, in 1948 the University College in Ibadan was founded and it began offering degrees jointly with the University of London. University College was Nigerias only university until 1960 when the country gained independence. The report of the Ashby Commission, which was set up to conduct an investigation in to Nigerias needs in the, fields of post school certificate and higher education in the next twenty years, led to the establishment of regional universities in the then three regions of the country. In the East, the University of Nigeria (1960) and in the North, Ahmadu Bello University, Zaria (1962) while in West, University of Ife (now Obafemi Awolowo University) (1961) while University College Ibadan was granted full fledged University status in 1962. Also in 1962, the University of Lagos, Akoka was established and as a city University, it provided courses in humanities, social sciences, medicine, law, engineering and also offered part-time programmes for workers. University of Benin was established in 1970. These six universities constitute Nigerias firstgeneration universities. At the same time the University College at Ibadan detached itself from the University of London, becoming an autonomous, full-fledged university. Between 1975 and 1977, the Federal Government established 7 new universities and took over 4 regional universities. In addition, at least 16 Stateowned and Federal Polytechnics were set up. In 1977 the government abolished tuition fees at all Federal Universities for full-time students. By the mid-70s all regional universities had been taken over by the Federal Government, and states began to establish new universities of their own, a trend which is continuing today. There is disparity between schools owned and controlled by the Federal Government and those owned and controlled by the States and Private Bodies. From 1970 to 1979, twelve States were carved out of the countrys 4 traditional regions; there are now 36 such states. Each time a new state was created the central government would set up a Federal University in that State. However, if the Federal Government failed to do this, the states would establish their own institutions of higher education. In the last two years of civilian rule at least five states along with private individuals (upon

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receiving licences) have established their own universities. As at 2003, Nigeria's entire tertiary education system (federal, state and private) presently comprises 220 institutions: 17 Federal Universities, 4 Federal Universities of Technology, 3 Federal Universities of Agriculture, 1 National Open University, 4 National Centres for Specialized Tertiary Instruction, 16 State Universities, 7 Private Universities, 1 Military University, 17 Federal Polytechnics, 27 State Polytechnics, 7 Private Polytechnics, 22 Federal Teacher Training Colleges, 38 State Teacher Training Colleges, 4 Private Teacher Training Colleges, 36 Colleges of Agriculture, 12 Specialized Training Institutes, and 4 Parastatal Supervisory Agencies (Saint et. al., 2003).8 Consequently, the enrolment and courses offered has progressed. Legacy of the Military Era Political interventions in the higher education system under a series of military governments imposed distortions and constraints on the systems development. By 1980, Nigeria had established a well regarded higher education system offering instruction at an international standard in a number of disciplinary areas. The universities of Ibadan and Ahmadu Bello, for example, earned global recognition for their research in tropical health and agriculture, respectively. Under successive military governments during the 1980s and 1990s, however, this sparkling reputation steadily tarnished. Acquiescing to the political pressures of social demand for access, the system was permitted to expand rapidly. Enrollments grew at an annual rate of 12 to 15 percent. Between 1980 and 1992, an additional 11 universities were established, some of them seemingly on an ad hoc basis. Government interference in university affairs (e.g., the direct appointment of vice-chancellors and, in some cases, of military "sole administrators") steadily increased. As university autonomy was usurped by central government, incentives and rewards for research productivity, teaching excellence and associated innovation gradually disappeared. In consequence, research output dropped, educational quality declined, and management structures rigidified. The hierarchical command structure of the military governments pervaded all aspects of the public service. In higher education, the National Universities Commission (NUC) evolved in consonance with this centralized model. Created in 1962 and reconstituted as a statutory body in 1974, the NUC was originally intended to function as a modest university grants commission, advising government on policy issues,

defining norms for quality assurance, channeling block grants from government to the universities, and ensuring the balanced and coordinated development of the system. By the end of the military era in 1998, it had become a large and unwieldy organization that was involved in all spheres of university endeavor. It micro-managed institutional finances through a series of predetermined expenditure guidelines and constant expenditure monitoring. It was involved in the selection of institutional leaders and members of governing councils. Its approval was required for all new university course offerings and for the physical development plans for each campus. It participated in the negotiation of staff salaries with the various academic unions. Along the way, the NUCs governing board was dissolved in 1992, leaving it accountable solely to the Minister of Education and the Head of State. As university autonomy was steadily compromised, academic staff and student organizations voiced public criticism of the regimes in power. Perhaps because these groups were viewed as bases for potential opposition to military rule, universities suffered a progressive erosion in the purchasing power of their budgets. Between 1990 and 1997, for example, the real value of government allocations for higher education declined by 27% (even as enrollments grew by 79%). The result was a precipitous fall in the quality of university education and research, as implied by the 62% drop in the real value of recurrent expenditure per student during this period (Hartnett 2000). Downward pressure on staff salaries, together with deteriorating working conditions and political repression on campus, generated a series of staff and student strikes during the 1990s, culminating in year-long closures of the university system in 1992 and 1996 (Oni 2000b). Meanwhile, growing corruption and human rights abuses by the regimes in power provoked international sanctions that made overseas travel by Nigerian citizens difficult. One unintended outcome of this ostracism was to isolate the country, including its universities, from global intellectual currents and access to knowledge during much of the 1990s. Recognizing the severity of the problems besetting the university system, military heads of state appointed presidential commissions in 1991 (the Grey-Longe Commission) and again in 1996 (the Etsu-Nupe Commission) to analyze the problems and recommend reforms. In both instances these commissions submitted thoughtful and constructive recommendations, but the governments of the day chose not to act on them. Higher Education Policies Since 1998 The year 1999 brought a democratically elected government to Nigeria for the first time in 15 years.

W. Saint et. al., op. cit., p. 265.

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With it came the political will to tackle the nation's long-festering higher education difficulties. Indeed, the present government has instituted more policy and institutional reforms in higher education than the combined governments of the previous two decades. Among its more notable actions are institutional audits of all universities and associated parastatal bodies, revocation of the vice-chancellors' former privilege of personally selecting 10% of each year's student intake, reconstitution of all university governing councils with broader representation, the licensing of seven private universities, exemption of university staff from public service salary scales and regulations, and a 180% increase in funding of the university system that raised per student allocations from the equivalent of USD 360 to USD 970 per year (Federal Republic of Nigeria, 2001). Crowning these efforts was a new Government Policy on Autonomy for Universities announced on July 21, 2000 (Federal Ministry of Education, 2000). This forward-looking policy framework gives university councils full responsibility for institutional governance, including the appointment of senior officers; restores block grant funding to universities; circumscribes the powers of the National Universities Commission; vests university senates with the authority to decide on curricula; returns to universities the right to set admissions criteria and select students; and lays the groundwork for new minimum academic standards. In March 2002 a National Summit on Higher Education was held to examine specific policy issues arising from the governments university autonomy policy. A reported 1,200 stakeholders attended, representing students, parents, academic staff, management, government and employers. Topics addressed included management, funding, access, curriculum relevance, and social problems (Federal Ministry of Education, 2002). In May 2002, a resulting set of legislative proposals designed to reform existing higher education laws and establish a permanent legal basis for these changes was approved by the Federal Executive Council and forwarded to the National Assembly for deliberation. The proposals reportedly would give university councils the responsibility for setting institutional policies, hiring top management, and forwarding institutional budgets; give institutions control over their own student admissions, limit the role of the NUC to quality assurance and system coordination; place curbs on the right of employees to strike; and legally de-link the universities from the public service, thereby ending their adherence to government regulations regarding employment, remuneration and benefits (Guardian, 2002). As far as higher education is concerned, Nigeria is finally a country on the move.

The Present Higher Education System Nigeria possesses the largest university system in Sub-Saharan Africa. Although South Africa's tertiary enrollments are higher, Nigeria boasts more institutions9. With 48 state and federal universities enrolling over 400,000 students, its university system supports numerous graduate programs (9% of enrollments) and serves as a magnet for students from neighboring countries. The system embraces much of the country's research capacity and produces most of its skilled professionals. Although nominally the responsibility of the Federal Ministry of Education, it is supervised by the National Universities Commission (NUC), a parastatal buffer body. A Joint Admissions and Matriculation Board administer a national university entrance examination and inform universities of applicant scores. A National Education Bank (formerly the Nigerian Student Loan Board) is charged with providing merit scholarships and student loans. Surveying this system and its institutional arrangements well over a decade ago, the World Bank concluded that more than any other country in Sub-Saharan Africa, the structures exist in Nigeria that could provide for a rational and effective development of university education (World Bank, 1988). In practice, however, the university system developed less rationally than anticipated. Enrollments in the federal universities (34% female, 59% in sciences) grew at the rapid rate of 12% annually during the 1990s and totaled 325,299 students by 2000 (NUC, 2002b)10. Enrollment growth rates were the highest in the South-South Region, followed by the North-East Region. Overall growth rates far exceeded government policy guidelines, as shown in Table 1.

Nigeria's entire tertiary education system (federal, state and private) comprises 220 institutions: 17 federal universities, 4 federal universities of technology, 3 federal universities of agriculture, 1 national open university, 4 national centers for specialized tertiary instruction, 16 state universities, 7 private universities, 1 military university, 17 federal polytechnics, 27 state polytechnics, 7 private polytechnics, 22 federal teacher training colleges, 38 state teacher training colleges, 4 private teacher training colleges, 36 colleges of agriculture, 12 specialized training institutes, and 4 parastatal supervisory agencies. The government traditionally categorizes its federal universities into groups based on their dates of establishment, as follows: 1st Generation (Benin, Ibadan, Ile-Ife, Lagos, Nsukka, Zaria); 2nd Generation (Calabar, Ilorin, Jos, Kano, Maiduguri, Port Harcourt, Sokoto); 3rd Generation (Abeokuta, Abuja, Akure, Akwa, Bauchi, Makurdi, Minna, Owerri, Umudike, Uyo, Yola). 10 In comparison, state university enrollments totaled 104,776 in 1997/98, accounting for 28% of Nigerias total university enrollments in that year (NUC 2002b).

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Table 1: Enrollment Growth: Policy Norms and Rates of Increase between 1989/90 and 1998/99.

CATEGORY 1st Generation Universities 2nd Generation Universities 3rd Generation Universities

NUC POLICY NORMS 3% 10% 15% Source: Hartnett 2000.

ACTUAL RATES 9% 13% 21%

GROWTH

Rising student numbers generated an enrollment ratio of 340 per 100,000 persons (Asia averages 650 and South Africa 2,500) and an average staff/student ratio of 1:21 (sciences 1:22; engineering 1:25; law 1:37; education 1:25). In terms of academic disciplines, the highest rates of enrollment growth occurred in the sciences and in engineering. As a result, the share of science and engineering in total enrollments rose from 54% in 1989 to 59% in 2000, consistent with national policy targets (NUC, 2002). Much of this expansion centered in the South-East Region, where a combined annual growth rate of 26.4% in science and engineering led the nation. However, efforts to expand enrollments and improve educational quality are severely constrained by growing shortages of qualified academic staff. Between 1997 and 1999, the numbers of academic staff declined by 12% even as enrollments expanded by 13%. Long term brain drain, combined with insufficient output from national postgraduate programs in the face of rising enrollments, has left the federal university system with only 48% of its estimated staffing needs filled. Staffing scarcity is most acute in engineering, science and business disciplines. Shortfalls are estimated at 73% in engineering, 62% in medicine, 58% in administration, and 53% in sciences. In contrast, no staffing shortages exist in the disciplinary areas of Arts and Education (NUC 2002b). The cost of running the federal university system totaled $210 million in 199911. Financing for that system comes almost entirely from the federal government. As a result of enrollment growth and currency devaluation, recurrent allocations per university student in the federal system fell from $610 to $360 between 1990 and 1999 with obvious implications for educational quality. However,
Projected expenditures for 2002 are approximately $260 million (Daily Trust, July 9, 2002).
11

agreements covering university salaries and teaching inputs negotiated with government by the Academic Staff Union of Universities (ASUU) in 2001 have raised this amount close to a much healthier $1,000 per student annually (Federal Republic of Nigeria, 2001). Federal university revenues are received mainly from three sources: the federal government (84%); income generation activities (7%); and various student fees (9%) even though no undergraduate tuition fees are charged. In 1992, student fees had represented just 2% of revenues. Equally attention-grabbing is the fact that, in real terms, capital budgets for federal universities surged by 40% during the 1990s. This is the combined result of special campus refurbishment and rehabilitation grants of substantial size, awards for university capital projects from the now-defunct Petroleum Trust Fund, and similar grants from the recently operational Education Tax Fund12. This trend of increasing financial support for the system appears likely to remain during the coming years. In August 2002 the NUC announced that the federal universities would receive an additional 7.2 billion naira (USD 60 million) from government in 2003 and 2004 for the completion of capital projects (Guardian, 2002). Patterns in the structure of university expenditures have improved steadily during the last decade. Whereas in 1991 academic expenses accounted for 49% and administration absorbed 46% of total expenditures, by 1999 these shares were 62% and 35% respectively. In the process, the portions devoted to teaching support and to library development showed positive gains across the system. Direct teaching expenditure per student,
12

The Education Tax Fund is financed by a 2% levy on pre-tax earnings of firms with more than 100 employees; half of these funds are earmarked for higher education.

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however, differed considerably among institutions. In 1997/98 funds spent on direct teaching ranged from a low of 137 naira ($2) per student at Sokoto to a high of 1,683 naira ($21) at Maiduguri. The system-wide weighted average was 331 naira ($4) per student (Hartnett 2000). Overall, the NUC expenditure guidelines appear to have had a salutary effect, although adherence to them seems to have varied considerably among institutions. Nevertheless, when the financing of higher education is placed within the context of overall education sector financing, the picture becomes less heartening. Although tertiary education presently receives a larger share of the education budget, the latters portion of the federal budget has diminished. Over the past four decades, various Nigerian governments have increased university subventions at the expense of investments in primary and secondary education, as they struggled to maintain financial support in the face of burgeoning higher education enrollments. Using data from 1962, Callaway and Musone (1965) concluded that Nigerias education expenditure represented 3.5% of GDP and 15.2% of total government expenditure. Of this amount, 50% was allocated to primary education, 31% to secondary education, and 19% to tertiary education. Hinchliffe (2002) estimates that currently, education expenditure is equal to only 2.4% of GDP and 14.3% of government expenditure. The share of these funds going to primary education has dropped to 35% and secondary educations portion has remained relatively unchanged at 29%, but tertiary educations share has nearly doubled to 35%. Nigerias recent allocation shares for education diverge sharply from regional and international norms. This divergence begs justification. For example, UNESCOs World Education Report 2000 indicates that for 19 other countries of Sub-Saharan Africa, education expenditures averaged 5.1% of GDP and 19.6% of total government expenditures. On average, these countries allocated 21% of their education budgets to tertiary education. In comparison with other African nations, Nigerias funding effort on behalf of education is less than half as vigorous and its budgetary priority for the education sector is lower, but tertiary education receives a much higher share of these comparatively smaller amounts of national resources. Education Policy in Nigeria Education in Nigeria is more of a public enterprise that has witnessed government complete and dynamic intervention and active participation (Federal Republic of Nigeria, 1981). It is the view of the formulated education policy in Nigeria to use education as a vehicle in achieving national

development. Education being an instrument of change, in Nigeria education policy has been a product of evolution through series of historical developments. The National Policy on Education in Nigeria was launched in 1977. The orientation of the policy is geared towards self-realization, individual and national efficiency, national unity etc. aimed at achieving social, cultural, economic, political, scientific and technological development. In 1985, the objectives of the policy were broadened to include free primary education among others. As noted by Anyanwu et al. (1999), this policy has been reviewed from time to time. Until 1984, the structure of Nigeria education system was 6 years of primary schools, 5 to 7 years of post primary schools (Secondary, Teacher Training College and sixth form) and 4 to 6 yrs of tertiary education (College of education, polytechnics, College of Technology and University education). From 1985, the structure that emanated can be classified thus, pre-primary or kindergarten education (2 to 3 yrs), for the children of ages 3 to5 years the primary school which is of 6 years period for children of ages 6 to 11 yrs, the post primary education which is of 6 years duration but divided unto two halves (3 years of Junior Secondary School and 3 years of Senior Secondary School) and the 4 to 6 of tertiary education level. This is called the 6-3-3-4 system (Anyanwu et al., 1999). Since the inception of the Obasanjo led administration in 1999, a Universal Basic Education Scheme was launched in 1999. The specific targets of the scheme are, total eradication of illiteracy by the year 2010 and increase in adult literacy rate from 57% to 70% by 2003 (FRN, 2000). Sequence of Higher Educational Levels in Nigeria In Nigeria, there is a sequence of higher educational levels. Three possible channels are illustrated in figure 2. The first channel assumes that a graduate went through NCE and then to the university. The other two channels are the more common ones, that is, those who went straight form secondary school to university and those who went through polytechnics to university. This assumption is predicated on experience from the labour markets and the years of schooling involved in each higher education levels, which place a higher value on university, polytechnics and NCE, in that order. Second and as an alternative, the other higher levels of education (Nigerian colleges of education and the polytechnics) are alternative routes after secondary education. Figure 3 illustrates this.

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National College of Education Primary Education Secondary Education Polytechnic

University (A)

University (B) University (C)

Source: Adapted from Okuwa (2004) Figure 2: Possible Channels to Higher Education in Nigeria

Nigerian Colleges of Education (D) Primary education Secondary Education Polytechnics (E)
Source: Adapted from Okuwa (2004) Figure 3: Alternative Routes to Higher Education

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With the first assumption, we are able to analyze the returns to an additional year of schooling among the higher education levels. The second proposition enables us to examine the returns on higher education in relation to lower educational level, and then compares the returns of the three channels of higher education. Out of the five possible channels of educational attainment, the most prevalent route is B, that is, from primary education to secondary education to university education. This is so because this route takes a shorter time to achieve an educational goal and cost less than any of the other routes. Most of the students who finish secondary school education and enter a polytechnic (for Ordinary National Diploma) or colleges of education do not stop these levels; they further their education by seeking university education. The prevalence of route B, followed by E, D, and A is supported by the number of student enrolled into these higher institutions. DEVELOPMENTAL EDUCATION IMPACTS OF HIGHER

Where y = Y/L = output per worker k = K/L= capital per worker h = H/L= average human capital GEXEDU = government expenditure on education. Dum = Dummy variable is defined as the number of general strikes, which is expected to have a negative impact on productivity performance and output growth Total factor productivity in this model is taken to be a function of exogenous variables, such as level of human capital, government expenditure and foreign inputs. The argument is that an educated labour force performs a major role in the determination of productivity level instead of entering the production function as a factor. The expenditure on education is assumed to influence the level of human capital which is expected to cause improvements in total factor productivity. In addition, higher level of human capital speeds up the adoption of foreign technology that is expected to balance the knowledge gap between the developed and the developing countries (Nelson and Phelps, 1966; Lee; 1995; Benhabib and Spiegel, 1994; Loening, 2002). Consequently, we take the technology parameter in the second model as a non-constant which is then allowed to be dynamic with time. It was therefore assumed that the level of human capital instead of the growth rates perform a basic role in the determination of the growth of output per worker in the second model whereby human capital affects the productivity parameter than the first model whereby the human capital enters as a production function factor. In estimating the model, the nature of the time series to determine whether they are stationary or non stationary and also their order of integration was first tested. This is to enable us determine the subsequent long-run relationship among the variables. In doing this, the Phillip-Perron unit root test was adopted. Thereafter, cointegration (which indicates the presence of a linear combination of non-stationary variables that are stationary among the series) were tested. In a case where cointegration does not exist, it means the linear combination is not stationary and the variable does not have a mean to which it returns. The presence of cointegration however implies that a stationary long-run relationship among the series is present. Table 2 below presents the stationarity test of the time series used in the empirical analysis.

Higher Education and Economic Growth in Nigeria Higher education is an important form of investment in human capital development. In fact, it can be regarded as a high level or a specialised form of human capital, contribution of which to economic growth is very significant. It is rightly regarded as the engine of development in the new world economy (Castells, 1994). The contribution of higher education to development can be varied: it helps in the rapid industrialization of the economy, by providing manpower with professional, technical and managerial skills. In the present context of transformation of nations into knowledge economies and knowledge societies, higher education provides not just educated workers, but knowledge workers to the growth of the economy. In estimating the relationship between higher education and economic growth in Nigeria, this study borrows substantially from the studies of Loening (2002) and as modified by Babatunde and Adefabi (2005) in which the following equation (which were derived from the Cobb-Douglas production function) were estimated. The equation, which is a vector error correction model, is stated as follows13: Ln yt = b + 1.Lnkt + 2.Ln yt-1 + 3.Ln kt-1 + 4.Lnht + 5.IMPGCFt + 6.GEXEDUt + 7.Dumt + Ut (1)
13

In this study we are mainly interested in the Education-Growth Relationship. For a detailed and elaborate view and assessment of the model, see Babatunde and Adefabi (2005).

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Table 2: Stationarity of the Time Series VARIABLES PHILLIPS-PERON PROBABILITY STATISTICS PRY -3.495 0.056** LNPRY -3.787 0.030* SEC -3.934 0.022* LNSEC -3.769 0.031* TER -3.586 0.047** LNTER -4.862 0.002* GEXPDU -4.292 0.009* LNGEXPEDU -9.753 0.001* IMPGCF -4.153 0.013* GDPPW -3.897 0.023* LNGDPPW -3.564 0.049** KAPW -2.548 0.304* GRKAPW -7.806 0.001* SCHOLNG -6.053 0.001* LNKAPW -9.041 0.001* *, (**) Stationary at 5 and 10 per cent level respectively. ORDER OF INTEGRATION I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1) I(1)

Table 3: Johansen Cointegration Test between Education and LNGDP per Worker

H0 r=0 r=1

Ha r1 r2

LNPRY Trace Statistics 16.222* 7.488**

LNSEC Trace Statistics 8.034 1.997

LNTER Trace Statistics 25.966* 1.440

SCHOLNG Trace Statistics 3.474 0.504

** Trace test statistics indicate 2 cointegrating equation (s) at the 5 per cent level assuming two lag in the test equation. *Trace test statistics indicate one cointegrating equation at the 5 per cent level assuming two lags in the test equation.

Table 4: Johansen Cointegration Test for the model of Human Capital as Factor Input in the Production Function. Series: LNKAPW STRIKE GRKAPW SCHOLNG LNGDPPW Lag interval (In first Differences)

H0 r=0 r=1

HA r1 r2

TRACE STATISTICS 84.271 51.403**

** Trace test statistics indicate 2 cointegrating equation (s) at the 5 per cent level assuming two lag in the test equation.

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Table 5: Johansen Cointegration Test for the Model of Human Capital Affecting the Technology Parameter. Series: LNKAPW STRIKE GRKAPW SCHOLNG LNGDPPW LNGEXPEDU IMPGCF Lag interval (In first Differences)

H0 r=0 r=1 r=2

HA r1 r2 r3

TRACE STATISTICS 193.423 105.202 58.184***

*** Trace test statistics indicate 2 cointegrating equation (s) at the 5 per cent level assuming two lag in the test equation. Table 6: VECM Estimates of the Production Function for Nigeria Dependent Variable is Percentage Change in Output per Worker VARIABLE HUMAN CAPITAL AS HUMAN CAPITAL AFFECTING FACTOR INPUT THE TECHNOLOGY PARAMETER CointEq -0.0261 (1.965) -0.013 (2.104) 0.026 (2.522) 0.005 (0.358) 0.003 (2.530) 0.036 (2.341) -1.237 (2.020) -0.511 (1.820) 1.633 (2.509) 0.645 (3.118) 0.289 (2.373) -0.039 (2.680) -0.007 (1.696) -0.029 (3.290)

D(STRIKE(-1))

D(STRIKE(-2))

D(GRKAPW(-1)) D(GRKAPW(-2)) D(SCHOLNG(-1))

0.049 (2.359) 0.054 (2.498) 0.171 (2.630) 0.336 (1.470) 0.667 (2.534) 0.161 (2.737) 0.029 (2.417) 0.055 (3.417) 0.012

D(SCHOLNG(-2))

D(LNKAPW(-1))

D(LNKAPW(-2))

D(LNGDPPW(-1))

D(LNGDPPW(-2))

D(LNGEXPEDU(-1)) D(LNGEXPEDU(-1)) D(IMPGCF(-1))

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D(IMPGCF(-2)) Constant 0.025 (0.017) 0.614 0.390 2.749 Absolute Values of T-Statistics in Parenthesis.

(1.965) 0.014 (2.181) 0.342 (1.291) 0.719 0.504 3.36

R-Squared Adj. R.Squared F-Statistics

Table 7: Johansen Cointegrating Vector for Human Capital as factor Input Normalized Cointegrating Coefficients: 1 Cointegrating Equation

CONSTANT 3.877

LNGDPPW 1.0000

LNKAPW 0.1390 (1.047)

SCHOLNG 0.860 (0.268)

STRIKE -1.118 (0.203)

GRKAPW 0.212 (0.238)

Log Likelihood 92.174

Table 8: Johansen Cointegrating Vector for Human Capital affecting the technology parameter Normalized Cointegrating Coefficients: 1 Cointegrating Equation

CONSTAN T -2.248

LNGDPP W 1.0000

LNKAP W 0.483 (1.030)

SCHOLN G 0.135 (0.008)

STRIK E -0.063 (0.005)

LNGEXPED U 0.242 (0.008)

IMPGC F 0.007 (0.002)

Log Likelihood 150.17 Table 9: Mean Monthly Earnings by Educational Level by Sex and Sector (1995)

PRIMARY SECONDARY COLLEGE OF EDUCATION Overall Male Female Public Sector Private Sector 2099.95 3067.07 2865.49 2196.06 2365.95 1611 2311.87 3279.05 3569.22 2734.58 3530.20 3880.31 3739.96 3981.98 2989.95

POLYTECHNIC UNIVERSITY

5330.01 5182.48 5685.71 4311.86

9133.02 9863.67 6637.14 6528.80

4955.15

8966.91

Source: Labour Market Survey 1995 as reported in Okuwa (2004)

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The stationarity test result presented in Table 2 revealed that all the variables are non stationary. They are all of order one from the Phillip Perron test statistics. Also, the result of the Johansen cointegration test between school enrolment and output per worker indicate that there exists long run relationship between education and output per worker for Nigeria. The long run relationship is more pronounced for enrolments at the primary school level, the tertiary school level and average years of schooling. Since there is existence of long-run relationship among the series, we can then go ahead to estimate the VECM for both models. The VECM result of the model of human capital as a direct input in the production function presented in column 2 of Table 6 revealed that the human capital variable measured by the average years of schooling is positive and significantly influence output per worker. Disruptions to the educational sector captured by the number of general strikes in a year also appear to have a negative impact on the output per worker. Other significant coefficients in the VECM are those for the dependent variables (at lags 1 and 2 at the 95 per cent level of significance) and also capital per worker (at lags 2 at the 5 per cent level of significance). The growth rate of capital per worker is however insignificant in the model. The VECM estimates of the first model thus indicates that the impact and lagged effect of an increase in human capital, less disruptions to the educational sector in terms of strike and an increase in capital per worker would lead to an improvement of the output per worker. The speed of adjustment coefficient is significant in the model as well. This implies that the rate at which the rate of variation of output per worker at time t, the dependent variable in the VECM system, adjusts to the single long-run cointegrating relationship is different from zero. In other words, the equation of output per worker contains information about the long run relationship since the cointegrating vector does enter into this equation. From the cointegrating vector estimates, a short run output per worker is corrected to a speed of 3 per cent per annum. In the second model, the level of human capital measured by average years of schooling is consistently significant and established that human capital has a positive effect on productivity growth in Nigeria. In addition, the result revealed that the amount of government expenditure on education significantly influence output per worker growth while foreign inputs is also a very important determinant of productivity growth through the adaptation of foreign technology. This result agrees with that of Loening (2002)s study of Guatemala. Disruptions and instability in the economy as proxy by number of strikes results in inefficient use of

factor inputs and output per worker. The speed of adjustment coefficient is however higher in this model with a speed of 4 per cent per annum. The normalized cointegrating coefficients in Table 7 and 8 represent the long run relationship between output per worker and the independent series in the two different models. From Table 7, the estimated long run effect of a 1 per cent increase of the average years of schooling on output per worker while keeping the other variable constant is approximately 0.86 percent while the long run elasticity of capital is 0.139 per cent. The long run elasticity of human capital in the model where human capital affects the technology parameter is 0.135 while that of capital is 0.483 per cent. In addition, the growth rate of capital per worker, import as a percentage of investment, and government expenditure on education has positive long run effects on output per worker while disruptions to the educational sector have a negative long run relationship with output growth. Precisely, two channels through which human capital can affect growth were investigated. Although, it may be difficult to separate the two different channels from each other, the result revealed that a well educated labour force possessed a positive and significant impact on economic growth through factor accumulation and on the evolution of total factor productivity. A good performance of an economy in terms of per capita growth may therefore be attributed to a well-developed human capital base. A major policy implication of our result is that concerted effort should be made by policy makers to increase the level of human capital in Nigeria. Our study therefore supports the human capital as a source of economic growth hypothesis. Returns on Higher Education in Nigeria Economic Rate of Return on Higher Education in Nigeria The analytical framework for returns on higher education in Nigeria follows from the work of Mincer (1974), which has witnessed modification and extension in the hands of Johnson and Chow (1997); Hammermesh and Biddle (1998); Aromolaran (2002) and Clark (2000). According to Mincer (1974), the rate of return to schooling is the proportional increase in earning per year of schooling if schooling and schooling level are independent and if the costs of foregone earnings are schoolings only costs. This definition is based on human capital investment model, in which an individual is assumed to make a human capital investment decision in such a manner as to maximize the discounted present value of future earnings, given the opportunity cost of time and goods spent acquiring such capital, and the rate of interest (Becker, 1964).

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Thus, following Beckers work, there is assumption that education, s, is chosen to maximize the expected present value of the stream of future incomes, up to retirement at date T; net of the costs of education, Cs. Therefore, at the optimum, s, the Present Capital Value (PV) of the sth year of schooling just equals the costs of the sth year of education; equilibrium is characterized by:

Ex2 = Square of Labour Market Experience e = Stochastic error term Following the assumptions on the possible channels of attaining higher education in Nigeria as contained in the section on sequence of higher educational levels in Nigeria, equation 5 was re-specified as: LnY = 0 + 1Pry + 2Sec + 3CoE + 4Poly + 5Uni + 6Ex + 7Ex2 + e ..(6) Where: LnY, CoE, Poly, Uni, Ex, Ex2 are as defined above Pry = Dummy for Primary education graduate Sec = Dummy for Secondary education graduate e = error term Note that the influence of schooling is separated from the influence of experience. The coefficient of the constant term represents the entry-level wage to a new labour market entrance with a lower education or no schooling while the coefficients of dummies capture the marginal wage effects and are used to compute the return to their level of education. The coefficients of the experience variable are intended to capture returns to on-the-job training (experience), which is assumed to be non-linear because of diminishing marginal returns to increased on-the-job training and rising marginal cost of further training over time. It is expected that: 0, 1, 2, 3, 4, 5, > 0 and 6 < 0 7 < 0 The estimated rate of return to an additional year of schooling is obtained by dividing the difference between the coefficients of adjacent groups by their differences in years of schooling. To obtain this, Equation 6 was used thus:

PV =

T S

Ws Ws 1 = Ws 1 + Cs .(2) t =1 (1 + rs )

Where rs is called the internal rate of return (assuming that s is infinitely divisible, for simplicity, so year should not be interpreted literally). Optimal investment decision would imply that one would invest in the sth year of schooling if rs > i, where i is the market rate of interest. If T is large, then the right hand side of the equilibrium expression can be approximated so that the equilibrium condition becomes

Ws Ws 1 = Ws 1 + C s (3) rs
Then, if Cs is sufficiently small, we can rearrange this expression to give

rs

Ws Ws 1 log ws log ws 1 (4) Ws 1

This means that the return to the sth year of schooling is approximately the difference in log wages between leaving at s and s-1 period of time. Following the theoretical foundation, it is evident that years of schooling or education is a key explanatory variable in wage or earning function. And in order to understand the relationship between schooling and earnings, we thus, specified and estimated a modified Mincerian earnings function as contained in Okuwa (2004). Here we regresses the natural logarithm of the monthly wage rate (LnY) on education and experience with the education broken into a set of dummy variable representing different educational levels. The model is specified thus: LnY = 0 + 1CoE + 2Pol + 3Uni + 4Ex + 5Ex2 + e..........(5) Where: LnY = the natural logarithm of the monthly wage rate CoE = Dummy for College of Education graduate Pol = Dummy for Polytechnic graduate Uni = Dummy for University graduate Ex = Labour Market Experience

Rcoe =
R poly =

3 2
S coe S sec

(7)

4 2
S poly S sec

(8)

RUni =

5 2
S uni S sec

.(9)

Where S = number of years of schooling of the subscripted educational level As stated earlier the above model is based on the work of Mincer (1974) and it has become the dominant procedure in estimating private rate of return to education. The use of dummy variable method rather than the years of schooling squared method adds a great deal of sensitivity to the result of private rates of return.

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Table 9 shows the mean monthly earnings by educational level, sex and sector. The table indicates that earnings of workers increase with more years of schooling irrespective of the sex of the worker and the sector in which the worker works. For instance, the mean monthly earning for Nigeria College of education graduates for all workers is N3880.37, this is N5330.01 and N9133.02 for polytechnics and universities, respectively. With respect to sex, the earnings show a slightly different pattern. That of male graduates soars from 4.8% for those of college of education to 38.6% and 90.3% for those of polytechnics and universities. The earnings differentials associated with schooling for females stood at 45% for college of education and 42% for polytechnic. This plummeted to 16.7% for university graduates. Also, female graduates of college of education and polytechnics earn on average slightly more than their male counterparts with 6.1% and 8.9% respectively. While a very wide divergence existed in the male-female mean earnings for university with the male having an edge by 48.6% point. Also, the mean earning of those with lower education (primary and secondary) increased with additional schooling. The income differentials associated with schooling is contained in Table 10. (a) The column titled Primary is the difference between the average earnings of a worker with no education and average earnings of a worker with a primary school education, as a percentage of the average earnings of no education worker. (b) The column titled Secondary is the difference between the average earnings of a worker with primary education and average earnings of a worker with a secondary school education, as a percentage of the average earnings of primary school graduate. (c) The column titled College of education is the difference between the average earnings of a worker with college-ofeducation education and average earnings of a worker with a secondary, as a percentage of the average earnings of secondary school graduate. (d) The column titled Polytechnic is the difference between the average earnings of a worker with polytechnic education and average earnings of a worker with a secondary school education, as a percentage of the average earnings of secondary school graduate. (e) The column titled University1 is the difference between the average earnings of a worker with university education and average earnings of a worker with a secondary school education, as a percentage of the average earnings of secondary school graduate. (f) The column titled University2 is the difference between the average earnings of a worker with university education and average earnings of those with polytechnic education, as a percentage of the average earnings of secondary school graduate. (g) The column titled University2 is

the difference between the average earnings of a worker with university education and average earnings of a worker with college-of-education education, as a percentage of the average earnings of secondary school graduate The sector in which a worker is employed also affects earnings (Table 9). College of education graduates in the private sector earns more that their counterparts in the public sector. For the University graduates, the difference is more pronounced, those in the private sector earn more (about 37.0%) difference. and as the e is 37.0%. Also, earning differentials associated with schooling were moderate for all the three levels of education for those in the public sector while it widened for those in the private sector. Table 11 reports the estimated economic rate of return to an average year of schooling as 11.02 percent. However, the associated coefficient of the schooling years was positive and statistically significant. By implication, the observed rate of return to education shows that an additional year of schooling is compensated for by 11.02 percent increase in wage of the individual. Also, an additional post-schooling year (i.e., experience) raises wage by 3.92 percent. These findings were similar to those of other studies like Nasir and Nazli, (2000) for Pakistan and Johnson and Chow, (1997) for China. With respect to each level of education, table 12 indicates that among the three levels of education under examination, only the coefficient of postsecondary education dummy is found to have the expected sign (i.e., positive) and statistically significant, whereas that of primary education dummy is found to be statistically significant with the wrong sign. This implies that post-secondary educational attainment, on average, raises the earning(s) of the concerned workers by about 15 percent. Furthermore, it can be observed from table 12, that secondary and tertiary education impact positively on workers earnings. The economic implication of these results is that one additional year of schooling at the level of education associated with the said percentages, raises workers earnings by the same proportion. With regard to the private rate of return, table 13 shows that it increases as the level of education increases. In general it was quite high for graduates of polytechnics and higher for universities graduates. This result applies to all categories of the sample, whether you are a public or private worker and irrespective of the sex of the graduate. But the rates of return were higher for male graduates than their female counterparts.

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Table 10: Monthly Earnings Differentials Associated with Schooling PRIMARY SECONDARY COLLEGE OF EDUCATION 18.3 4.8 45.6 -15.3 -6.6 POLYTECHNIC UNIVERSITY1 UNIVERSITY2 UNIVERSITY3

Overall Male Female Public Sector Private Sector

51.2 50.9 69.8 52.7 46.1

62.5 45.2 107.0 22.1 61.6

178.5 176.4 142.7 84.9 192.4

71.4 90.3 16.7 51.4 81.0

135.4 163.7 66.7 118.4 213.0

Source: Adapted from Okuwa (2004)

Table 11: Returns to Education and Years of Schooling

VARIABLES Constant Years of Schooling Experience Experience2 Gender Adj R2 F-Statistic

COEFFICIENTS 2.053 (21.014) 11.024E-02 (31.024) 3.918E-02 (10.254) -4.598E-02 (-7.985) -1.333E-02 (-0.024) 0.45 172.69
t statistics are in parenthesis

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Table 12: Returns to Education and Level of Education

VARIABLES Constant Primary Secondary College of Education Polytechnic University Experience Experience Gender Adj R2 F-Statistic
2

COEFFICIENTS 8.003 (31.711) -1.124 (-1.241) -1.012 (-1.002) 7.852 (21.0254) 6.284 (15.231) 10.294 (23.468) 3.414E-02 (9.254) -4.001E-02 (-6.191) -.334E-02 (-0.002) 0.55 672.69
t statistics are in parenthesis

Table 13: Private Rate of Return to an Additional Year of Education (%)

MALE

FEMA LE

PUBLI C

PRIVAT E

TOTAL SAMPLE

Primary Secondary College of Education Polytechnic University 1.2 8.1 11.6 18.9 4.4 11.25 7.9 11.2 2.1 6.1 10.3 15.4 3.2 11.3 15.6 21.5 1.5 13.01 11.03 18.02

Source: Computed using the rate of return specified in the model.

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Table 14: The effect on Increases in percentage of higher education Graduates on Wages

City Effects

City, Individual Effect (3) 2.23 (1.26) 0.04 (0.04) 0.11 (0.00)

City x Individual Effect (4) 2.02 (1.28) 0.03 (0.02) -0.14 (0.02)

City x Individual Effect (5) 2.02 (1.28) 0.03 (0.02) -0.14 (0.02)

City x Individual Effect (6) 2.20 (1.27) 0.02 (0.02) -0.14 (0.02)

City x Individual Effect (7) 2.20 (1.27) 0.02 (0.02) -0.14 (0.02)

Higher Education Share Experience Experience sq./100 female R2 Unemployment Rate City Controls City Rent

(1) 2.44 (1.40) 0.02 (0.00) -0.02 (0.01) -0.20 (0.02) 0.34

(2) 2.20 (2.40) 0.02 (0.00) -0.09 (0.02) -0.22 (0.01) 0.30

0.64

0.69

0.69

0.74

0.74

Yes

Yes Yes

Yes Yes Yes

Table 15: Unit Public Cost by Level of Education and Type of Institution by State, 1998. PRIMARY STATE SECONDARY Enugu 2,102 1,881 TERTIARY TEACHER TRAINING 2,811 (23,960) Rivers Borno Kano Jigawa Benue Ekiti Oyo 1,310 397 1,747 677 1,886 1,220 1,336 3,655 3,809 3,633 12,101 2,523 2,987 1,333 4,116 (24,325) Source: Case studies 22,929 16,957 27,952 20,117 15,125 6,702 4,384 131,252 17,659 201965 41,595 25,471 21,892 14,935 POLYTECHNIC STATE UNIVERSITY 5,472 (29,763) 21,588 20,000 16,957 FEDERAL UNIVERSITY 28,259

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Table 16: Annual Fees and Charges in Government Educational Institutions in Selected States. (N)

Primary Secondary College of Education Institute of Management State Polytechnic Federal Polytechnic Tertiary State University Federal University

EKITI 500 2,150 12,750

ENUGU 455 1,660 8,750

BORNO RIVERS 120 625 175 1,430

BENUE 115 290 3,900 6,350

2,020 8,850 14,900 14,300 1,405

Source: Case Studies and as reported in Hinchliffe (2002)

7,500 12,000

1,640 550

Table 17: Estimated Annual Cost of Educational Materials in Government Institutions in Selected States. (N)

Primary Secondary College of Education State Polytechnic Federal Polytechnic State University Federal University

EKITI 500 2,125 7,000 7,000 8,600

ENUGU BORNO RIVERS BENUE OYO 2,870 720 1,750 540 490 6,600 850 3,750 5,300 2,075 6,100 11,850 7,580 6,500 10,000 2,555 12,250 10,220 8,500 13,500 18,500

Source: Case Studies and as reported in Hinchliffe (2002)

Table 18: Federal Government Expenditures on Education as Share of Total Federal Expenditure, 19972002 in Percentages.

1997 Recurrent Capital Total 12.3 6.1 9.9

1998 12.0 7.5 9.6

1999 11.7 5.0 9.0

(2002)

2000 9.4 8.5 9.0

2001 9.5 6.0 7.6

2002 9.1 6.0 8.0

Source: Federal Government of Nigeria, Annual Budget (various years). Reported in Herbert (2002) and Hinchliffe

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Social Returns to Education in Nigeria Blundell et al (2001) noted that there are three distinct ways of defining returns to education. These are the private return, the social return and the labour productivity return. Social returns to an educational investment are said to indicate the desirability of this investment to society, Venniker (2000). The nonmarket benefits of education are consequences other than those received in the form of higher wages or non-wage benefits from working. Furthermore, the non-monetary (non-market) rates of return for both private and social rates of return are difficult to quantify. Blundell et al (2001) suggest that the social return definition also highlights any externalities or spillover effects, though, some are difficult to measure and quantify. Precisely, social returns to education refer to positive or negative outcomes that accrue to individuals other than the person or family making the decision about how much schooling to acquire. They are therefore benefits (potentially also costs) that are not taken into account by the decisionmaker. The model used in estimating the social returns to education was adapted from Moretti (2002)14. The model is as follows: Suppose that the wage of individual i living in city c in period t is determined by an equation of the form Log(wict) = Xitct + Pct + Zct + dc + dt + uict ..(10) Where Xit is a vector of individual characteristics, including years of schooling; Pct is the percentage of higher (tertiary) educated workers in the labour force of city c in year t; Zct is a vector of city characteristics which may be correlated with Pct; dc represents a city fixed effect; and dt is a year effect. The residual is the sum of three components: uict = ci + ct + ict .(11)

The coefficient of interest is , which is the estimate of the effect of higher education share on average wage after controlling for the private return to education. By letting ct depend on the year and city, the specification of equation 3 allows for changes over time and across cities in the private return to education. The model is a city fixed specification, which controls for some unobserved heterogeneity at the city level. It sweeps out the effect of permanent city characteristics such as the industrial structure and physical and cultural amenities that confound identification of the effect of higher education share on wages. However, there may be unobserved correlates of wage and higher education share that confound identification. Equation 3 identifies two main sources of such omitted variables: individual unobserved heterogeneity, i, and time varying shocks to the local labour market, ct. Table 14 reports some estimates of equation 10 which were obtained by allowing the private return to education to vary over time and across cities. The estimation was such that private return to education, ct, is the sum of two components, a city effect c, and time t. That is ct = c + t. These components allow observed rates of return to vary because of differences in the return to schooling across cities and time. Estimates of the external rate of return shows that a one percent point increase in the share of tertiary educated workers in a city is associated with a 2.44% increase in wage. This is reported in the first column, which was obtained by ignoring the panel structure of the data. In column two, heterogeneity across metropolitan areas that may cause bias in the cross section was controlled. This was done by including city fixed effect. And in this case the external returns conditional on city fixed effects is 2.20%. Column three reports results obtained including both city and individual fixed effects. Individual dummies were used to control for any individual permanent characteristics such as ability or family background. Also, here identification comes from two sources: first, individuals may change cities and second, higher education share changes in a city over time. From this column the estimated external rate of return was 2.23%. The model also estimated what happens to the wage of a given individual in a given city as higher education share around her increases over time. The estimated external return to education in this case was 2.02, slightly lower than the individual fixed effects estimate. It can thus be concluded that unobserved ability is not a major source of bias. This conclusion is based on the assumption that the return to unobserved ability in a city, c, is fixed over time. This is shown in column four. In column five, the

where i is a permanent unobservable component of human capital, such as ability or family background; c is a factor loading which represents the return to unobserved skill in city c; ct represents time-varying shocks to labour demand and supply in city c in period t; ict is the transitory component of log wages which is assumed to be independently and identically distributed over individuals, cities and time.

14

For a detailed version of the model see Moretti Enrico (2002) Estimating the Social Return to Higher Education: Evidence from Longitudinal and Repeated Cross-Sectional Data National Bureau of Economic Research (NBER) Working Paper 9108, Massachusetts: Cambridge, August. http://www.nber.org/papers/w9108

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local unemployment rate is included, this was used as a proxy for labour demand shifts potentially correlated with higher education share. While in column six, the unemployment rate, and a vector of other city characteristics potentially correlated to higher education share were included. Estimates of the social return to education obtained in both cases do not seem to be sensitive to the inclusion of such control. In column seven, estimates were obtained by augmenting the estimated model with the cost of housing. The coefficients on average education are virtually unchanged from what was obtained in column six. Cost of Higher Education in Nigeria Unit Public Cost by Level of Education The data which have been collected in the case studies also allow for the public cost per student year (unit recurrent cost) to be estimated for each level of education across the sampled states. The results, again for 1998, are described in table 15. To provide greater detail, the unit costs of different types of tertiary institutions have been disaggregated. Due to the tendency of some state governments to inflate primary school enrolments, the (consequently depressed) unit cost estimates at this level need to be viewed with particular caution. Omitting Jigawa and Borno for this reason, the average unit cost at this level was N1600. The much higher rate recorded for Enugu may reflect falling enrolments in recent years. For secondary schooling, again there appear to be problems with the data for Jigawa and also for Oyo, where the costs appear to be unreasonably low. For the other states the average unit cost was N3080. Notes: The official primary enrollments for Jigawa and Borno are seriously overestimated, e.g., Borno 288,000 in 1995 and 750,000 in 1998. The relatively high cost for primary schooling in Enugu partly reflects the fall in enrollments in government schools over recent years, e.g., from 418,000 in 1995 to 264,000 in 1999. Figures in parenthesis for Enugu and Oyo indicate total unit cost including fees, etc. The unit public costs for the Federal universities in 1998 in Kano, Oyo, Borno, Rivers and Enugu according to the study by Hartnett (2000) were N18, 755, N25, 709, N17, 978, N19, 597 and N25, 085, respectively. The average across all federal university students was N23, 414. Unit costs in post secondary institutions are more diverse. Across all the 24 Federal universities the average is N23, 414 (Hartnett, 2000), which is similar to three of the examples in the table. The data for Benue may reflect higher costs of agricultural universities. The public costs of the state universities appear to be a little lower, and in the case of Enugu much lower due to very high rates of cost recovery.

Unit costs of the teacher training institutions and polytechnics seem to vary considerably across states. In Kano, both are very high (due to low enrolments) and in Enugu and Ekiti they are low. Tentatively, in those states which do not require the payment of high fees the public unit costs of non university tertiary education lie between N15, 000 and N25, 000. From the sample of states and institutions described in table 10, the ratios of public unit cost for primary, secondary, tertiary and university are roughly 1:2:13:15. The immediate reaction to this set of ratios is that, compared to primary schooling, the costs of secondary schooling are being held down but that post secondary education continues to be relatively expensive. The unit costs are all very low when compared to those in most other low income countries, particularly in sub-Saharan Africa. However, since 1998, teacher salaries, and hence each of the unit costs, have increased substantially. For instance, assuming that half of the primary teachers in a state are G II level and the other half are NCE, that the average grade is the midpoint in each range, and that the teacher/pupil ratio is 45:1, the teacher cost per pupil year in primary schooling in 2002 would be N3900. Adding an additional 10 percent for management, materials, teacher training and so on implies a unit cost of around N4300. Since salaries have risen for teachers and lecturers at all levels of the education system, the pattern of unit costs will not have changed greatly from that described above for 1998. Household Expenditures on Education Education is rarely a (financially) costless activity to the student or household, even when the child attends government schools at which, before now, no tuition fees are charged. The data on household expenditures generally covered educational materials, clothing, meals and transportation, as well as fees and/or other charges. However, while the estimated costs of the non-fee/charge items formed a large share of household expenditures in schooling, the estimates were particularly subjective. The descriptions below are limited to the annual costs of fees/levies and then to educational materials. Tables 16 describe fees/charges in government and private schools respectively in five states. Charges in government primary schools are low (N115 to N625) but, at least in the southern states, they begin to rise significantly in secondary school to around at least N1500. In most cases, the direct costs of enrolling in government non-university tertiary institutions are between N4, 000 and N9, 000 while the state universities appear to charge around N12, 000 to N15, 000. Those who attend Federal universities face lower charges. These household costs can be compared to the public unit costs, in the section

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above, of N1600 primary, N3100 secondary and N20, 000 tertiary. The ranges suggested by the case studies are wide but it appears that parents face direct payments of at least N20, 000 a year for secondary education and, as the case studies point out in detail, they can be much more. Table 17 describes estimates of the household costs of educational materials in government schools. Again, these figures were often rather arbitrarily derived but they are sufficient to indicate that attendance at government educational institutions requires significant household expenditures. Public and Private Financing of Higher Education in Nigeria Profile of Public Expenditure on Education in Nigeria15 Education allocation as a percentage of total budgets ranged from 3.3% in 1999 to 9.88% in 1986. A close look at the distribution shows that the pattern of government budgetary allocation to education as a percentage of total budget was not consistent. Instead of maintaining an increasing proportion of the yearly budget, it has been largely fluctuating since introduction of SAP in 1986. Regardless of incessant strikes and negotiation to stimulate governments to increase the proportion, the proportion has been below 8% apart from 1994 and 2002, which were slightly above 9%. Since the oil crisis in the eighties, the proportion of capital budget allocated to education has been consistently lower than the proportion of recurrent expenditure. Over the years, the government capital expenditure allocated to education as a percentage of total capital budget ranged from as low as 1.71 in 1999 and not up to 9% in all cases. Like total budget, the proportion was also not consistent. In 1998, expenditures were equivalent to 2.3 percent of GDP and to 14.2 percent of the total expenditures of the three tiers of government. A similar but more comprehensive exercise undertaken for 1962 indicated a share of GDP of 3.6 percent and of total government expenditure of 18.2 percent. Further, on average for 19 sub-Saharan African countries in the mid 1990s, education expenditures were equal to 4.7

percent of GDP and 19.6 percent of government expenditure. In addition to the relatively low levels of total education expenditure in Nigeria, the estimated distribution across the levels of education varied significantly. Since 1998, teachers salaries (and government expenditures overall) have increased substantially. This will have increased the share of education in GDP, but it is not yet clear how the share of government expenditure has changed, or the distribution. More precisely, federal government expenditures on education are below 10 percent of its overall expenditures (see Table 18). Overall, the shares have varied between 9.9 and 7.6 percent and the trend has been largely downward. Typically, between 70 and 80 percent of expenditures are for recurrent activities. However, in 2000, the capital allocation increased to 45 percent of the total, in line with the overall large increase in capital expenditure in the Federal Governments budget. While each tier of education has at various times been the concurrent (joint) responsibility of both Federal and state governments, the former has historically been much more involved at the post secondary level. Table 19 presents the shares of Federal Government recurrent and capital expenditures by level of education between 1996 and 2002. Over the period, the share for the (24) Federal universities has varied between roughly 40 and 50 percent of total Federal expenditures, while those for the (16) polytechnics and (20) colleges of education have remained fairly constant (apart from one year) at around 17 percent and 11 percent respectively. Overall, during the whole period, the tertiary education sub sector has received between 68 percent and 80 percent of the total Federal expenditures for education. In five out of the seven years, the allocation to secondary education has been above that for primary. The average shares have been 14.5 percent for secondary schooling and 11.5 percent for primary schooling. Federal government expenditures on secondary schooling are basically for the federal government colleges (unity schools), usually three of which are established in each state (80 in total so far) and the 16 federal secondary technical colleges. Allocations for primary schooling have been more adhoc resulting from specific initiatives. In the past three years, most have been for the construction of three classroom blocks and classroom renovation in each local government authority. Allocations to the federal polytechnics and colleges of education have been much below those requested by the respective Boards. The data are only available

15

The estimates of public expenditures on education are made on partial and often inadequate data but the results are disturbing (See Hinchliffe, (2002)). The financing of public funded universities compete with all of the other sectors which are also claimants to the federal fund. Government budget allocations are made in line with the perceived need of each sector which contest for government funds.

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to 1996 but in that year, the polytechnics received 47 percent of the requested recurrent budget and 55 percent of the capital request (Udeh, 2000). For colleges of education, the allocations were 45 percent and 22 percent of the requests respectively. While it is possible to say that the Federal Government allocates around 9 percent of its total expenditures to education, it is not possible to be precise regarding what share of total educational expenditures by all three tiers of government combined these resources constitute. Similarly, it is not possible to determine the share of the total cost of each level of education which is provided by the Federal Government. As a result, a set of case studies covering nine states was undertaken for the period 1995 to 199916. From these case studies, the financing role of each tier of government, both in general and by level of education was obtained. State Government Expenditures The combined recurrent and capital development expenditures of all state governments total around only one fifth of those made by the Federal government. The revenues of state governments are dominated by the allocations from the Federation Account plus, more recently, receipts from the centrally collected value added tax. Internally generated revenues were between 20 and 25 percent of total state revenues between 1995 and 2000. The only exceptions were Lagos and Rivers States (which raise around half of their total revenues), and Delta State (which raises around one third). State governments are involved in the funding of each level of education, though to different degrees. Primary education is largely funded through local government revenues while the Federal Government concentrates around three-quarters of its expenditures in post secondary education. State governments in practice fund most of secondary education and often a significant part of post secondary education, in addition to relatively small amounts for primary schooling. An indication of the pattern of state government funding across levels of education is provided in table 20 for nine states. These summary data are for 1998. In the table, post secondary education is divided between universities on the one hand and polytechnics, colleges of education and state technical colleges (labeled tertiary) on the other. On average around two thirds of all state government expenditures on education are for secondary schooling, while the average for primary schooling is around 11 percent (though the range appears to be very wide). The shares for tertiary and university

education combined vary substantially with a range of between 13 percent and 40 percent. On average, states spend around 19 percent of their total educational expenditures on tertiary education and those which also have a state university spend on average an additional 15 percent. Local Government Expenditures The revenues of local governments are from three sources namely: statutory allocations from the Federation Account, proceeds of the centrally collected value added tax and internally generated revenues. According to the revised estimates for 1999, across all local governments only 7.7 percent of the total N60,800 million revenues were generated internally, while 15.7 percent came from the value added tax and 76.6 percent from statutory allocations (Central Bank of Nigeria, Survey of Local Government Councils). Local governments essentially fund the salaries of primary school teachers. In 1999, the deductions at source made for primary education from the local governments allocation of the Federation Account and allocated to the National Primary Education Commission (NPEC) for onward transmission to the State Primary Education Boards (SPEBs), totaled N25,422 million or 42 percent of total local government revenues (NPEC data sheets and Central Bank). Aggregating all local governments within each state, this share ranged from 20 percent to 95 percent implying enormous differences in the burden between local governments and states resulting from this single responsibility. The pattern is varied among the selected states. In Borno, for most of the period, the share of the statutory allocations being deducted for salaries was relatively low, as it was in Kano. In states such as Oyo and Enugu, however, where education is spread widely, the burden has been much higher. Rivers is a special case in that recent changes in the derivation aspects of the Federation Account distribution formula have been to its advantage and the share of local government revenues required for teachers salaries fell. In 1999, the shares being deducted increased considerably in several states following an increase in teacher salaries initiated by the Federal government. Even then, considerable specific purpose grants and loans (N21 billion) had to be allocated to the SPEBs by the Federal Government between January and September to compensate. Additional large increases in salaries were awarded in 2000. By the end of 2001, several local governments were receiving no payments from the Federation Account as the deductions for teachers salaries equaled or were greater than their allocations.

16

See Hinchliffe (2002)

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Though, capital expenditures on primary education are not regarded as a priority by local governments, some local governments have been funding capital expenditures. As a share of overall capital expenditure, those on education ranged between 5.2 percent and 7.8 percent and as a share of all local government expenditure the range was between 1.7 percent and 2.7 percent. Finally, as a share of total local government spending on education, capital expenditures were just 4.5 percent in 1999 (Table 21. Expenditures by Level of Education Primary Education Constitutionally, primary education is a responsibility of the states and their local governments. In recent years it has been the most straightforward level of education in terms of source and level of funding. Primary schooling is managed through the State Primary Education Boards (SPEB) which receive funds mainly from the local governments (indirectly through deducting teacher salaries fro m their entitlement from the Federation Account) and from the state governments (again from deductions at source). The state governments deduction is meant to be equal to 15 percent of the local governments contribution for salaries and to cover non salary items. Since the large salary increases in 1998/99 the share has been reduced to 10 percent. While there is no requirement for Federal funding, during the 1990s there was an understanding that as per pupil grant of N50 would be allocated for educational materials. These grants were made irregularly but more recently the Federal government has made funds available for both furniture and school buildings. According to the case studies, funds for primary schooling were provided by each tier of government in 1999 as described by the shares in Table 22. The stress on local governments caused by the requirement that they fund all primary teacher salaries varies by state, but also across local governments within a state. For example, in Ekiti between 1998 and 2000, between 44.7 percent and 53.0 percent of the 16 local governments combined statutory allocations were deducted at source for teacher salaries. However, across the local governments, the share varied between 14.4 and 72.6 percent in 1998, 18.6 and 83.4 percent in 1999 and 17.0 and 75.0 percent in 2000. Taking 1999 as an example, in ten local governments the deductions were equal to between 35 and 50 percent, in two the share was above 50 percent and in four it was below 35 percent. Overall, around 86 percent of the funds for primary education are derived from the local governments

allocation from the Federation Account. Most of this is for teacher salaries. Only very small amounts are provided by the Federal government while the state government contributions appear to be around 10 to 12 percent. While there are issues such as differences in required effort across local governments, limited levels of local accountability and high management costs, the system by which the NPEC has distributed funds from the three tiers of government to the SPEBs appears largely to have been successful over the past nine years and the earlier experiences of unpaid teachers has not been repeated. Secondary Education In none of the sampled states do the local governments contribute financially to secondary education (Table 23). The shares of the Federal government described in the case studies are surprisingly high, averaging around 25 percent. Even though the Federal Government Colleges are high cost boarding institutions there are usually only three in each state, plus a total of 16 federal secondary technical colleges. Tertiary Education Both the state governments and the Federal government are major funders of post secondary education. Both tiers manage and finance colleges of education, technical colleges/polytechnics and universities, though not every state has the same set of institutions. For example, only 16 of the 36 states have their own state university. The actual distribution of funding for tertiary institutions in a state between the Federal and the state government depends on the range of federal institutions and their type, as the examples in Table 24 demonstrate. For instance, no Federal institutions have yet been established in Jigawa and as a result this sub-sector is fully funded by the state government. On the other hand where there is a federal college of education and a polytechnic, and where the federal university is one of the first set to have been established and with high enrolment levels (Ibadan, Nsukka, Ahmadu Bello, Ife and Lagos), the Federal Government share tends to be particularly high. On the whole, from our sample of states, the Federal government share is greater than that of the state governments. A central characteristic of tertiary level funding in Nigeria is that each of the two tiers of government funds only its own institutions. In Table 25, the overall distribution of allocations across educational level is presented. Again there are variations across sampled states but some patterns have emerged. In all cases but one, primary schooling receives the largest share of expenditures averaging 40 percent.

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Table 19: Federal Government Expenditures Shares by level of Education, 19962002 in Percentages.

1996 Tertiary Universities Polytechnics Colleges of Education Secondary Primary 10.4 9.7 79.9 52.5 16.2 11.2

1997 78.9 44.6 23.2 11.1

1998 68.4 39.4 17.0 12.0

1999 69.0 39.9 18.5 10.6

2000 75.8 49.2 17.0 9.6

2001 68.1 39.6 16.6 11.9

2002 76.9 51.2 16.0 9.7

11.3 9.8

14.6 16.9

18.7 12.2
(2002)

15.3 8.9

15.5 16.4

15.6 7.5

Source: Federal Government of Nigeria, Annual Budget (various years). Reported in Herbert (2002) and Hinchliffe

Table 20: Shares of State Government Education Expenditure by Educational Level. Selected States, 1998 in Percentages.

PRIMARY SECONDARY TERTIARY UNIVERSITY Enugu Rivers Borno Kano Plateau Benue Ekiti Niger Oyo Average 17.0 9.7 5.0 9.2 3.3 11.9 10.4 13.8 23.1 11.4 52.7 50.6 69.1 66.3 83.9 50.2 66.2 65.8 37.6 60.3 30.3 21.4 25.8 24.5 12.8 15.3 13.0 16.6 27.5 20.8 0.0 18.3 0.0 0.0 0.0 22.2 10.4 3.8 11.8 7.4

Source: For Enugu, Rivers, Borno, Oyo, Benue, Niger, Ekiti, and Kano from the case studies. For Plateau from state budgets. Reported in Hinchliffe (2002)

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Table 21: Estimated Allocation of Education Expenditure across Levels of Education by Each Tier of Government for 1998 in N Million and Percentages.

PRIMARY SECONDARY TERTIARY UNIVERSITY TOTAL Federal 3,999 (16.9) State 2,119 (9.0) Local Government Total 16,627 (100.0) (35.6) 3,455 (1.6) 15,051 (63.9) 0.0 (0.0) (29.0) 6,863 (29.0) 3,604 (15.3) 0.0 (0.0) (16.4) 9,325 (39.4) 2,779 (11.8) 0.0 (0.0) (19.0) 23,668 (100.0) 23,555 (100.0) 16,627 (100.0) (100.0)

Percentages are in parenthesis Source: Federal Government of Nigeria, Annual Budget (various years). Reported in Herbert (2002) and Hinchliffe (2002)

Table 22: Sources of Funding for Primary Education in Ten States, 1999 in Percentages KANO BORNO OYO RIVERS ENUGU BENU E Local Government State Federal 9.4 5.8 11.5 5.5 19.4 2.1 12.6 2.8 12.4 2.8 4.4 0.0 11.7 2.9 14.8 0.2 12.1 0.0 12.1 0.0 84.8 84.1 78.5 84.6 84.8 95.6 EKIT I 85.4 NIG ER 85.0 JIGAW A 87.9 LAGO S 87.9

Source: Case studies, and SPEB data for Lagos.

Table 23: Sources of Funding for Secondary Education in Eight States, 1999 in Percentages

BORN O Local Government State Federal 0.0 67.9 32.1

OYO RIVER S 0.0 81.8 18.2 0.0 73.0 27.0

ENUG U 0.0 85.4 14.6

BENU E 0.0 75.9 24.2

EKIT I 0.0 100.0 0.0

NIGE R 0.0 70.8 29.2

JIGAW A 0.0 100.0 0.0

Source: Case studies, and SPEB data for Lagos.

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Table 24: Sources of Funding for Tertiary Education in Eight States, 1999 in Percentages BORN O Local Government State Federal 46.7 53.3 40.8 59.2 47.0 53.0 6.4 93.6 34.8 65.2 38.8 61.2 31.2 68.8 100.0 0.0 0.0 0.0 OYO RIVER S 0.0 ENUG U 0.0 BENU E 0.0 0.0 EKITI NIG ER 0.0 JIGAW A 0.0

Source: Case studies.

Table 25: Distribution of Total Educational Funding by Educational Level, 1998 in Percentages BORN O Primary Secondary Tertiary University 23.4 47.1 13.8 15.7 43.1 15.8 16.0 25.1 OYO RIVER S 30.4 28.4 16.3 24.9 ENUG U 33.8 16.2 8.7 41.3 BENU E 60.9 14.8 5.0 19.3 41.0 31.4 23.6 4.9 EKITI NIG ER 37.2 36.7 14.0 12.0 JIGAW A 48.4 45.4 6.2 0.0

Source: Case studies. Table 26: Total Enrolment of Females to Males in Higher Institution in Nigeria

YEAR Total Enrolment Percentage of Females Percentages of Males

2001 697,000 45.0 55.0

2002 746,000 45.0 55.0

2003 846,000 43.0 57.0

2004 888,000 43.0 57.0

2005 930,000 44.0 56.0

Source: Central bank of Nigeria (CBN) 2005 Annual Report

Table 27: Unemployment by Educational Level (%)

Year No Schooling Primary Education Secondary Education Tertiary Education

1999 15.3 8.1 13.7 12.3

2003 12.5 7.4 12.7 10.8

Source: Federal Office of Statistics (FOS) 2004 Nigeria Statistics Fact Sheet on Economic and Social Development 1999 2003. April. Abuja.

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Note: For Jigawa the costs of the state polytechnic are included in recurrent in secondary. The overall average for secondary schooling is 28 percent but this share appears to be pushed upwards by the two northern states. This could reflect high boarding costs, though for Jigawa there are also some problems of classification. The average share for post-secondary education is 32 percent and in each case apart from Ekiti, Jigawa and Niger it is above the share for secondary. In Ekiti and Jigawa, there is no federal university. Higher Education Policy and Social Equity Higher Education and Social Equity In this study, social equity was measured by the following: Access to Higher Education by gender at the entry level; Access to Higher Education by income; Access to Higher Education by language (ethnicity); and Access to Higher Education by geographical location. Presently, Nigeria has about 128 tertiary institution owned by both the public (federal and States) and private individuals. Each has its own admission policy17. In Nigeria, at the entry level and in terms of access to higher education, there is no gender bias. Admissions are carried firstly on merit, then later on quota system. The quota system is usually in terms of catchment area or educationally less-advantaged states. For instance, all those with the requisite qualification from the secondary school level18 are eligible to apply for admission into any of the tertiary institutions. An admission entrance examination is conducted for all those who have the requisite qualification from the secondary education, after which a cut-off19 mark is set on merit. After the initial cut-off, some element of quota system is then introduced. In this case some
17

federal universities, polytechnics, and colleges of education have catchment areas. Those within the catchment areas get an upper hand over those from outside the catchment areas. For instance, those within the catchment get admitted with a lower cutoff mark relative to others. Also, there are those from states regarded to as educationally less-advantaged states. Indigenes of the states in this category are given some priority during the admission process. They are get admitted with a lower cut-off mark relative to others. With respect to enrolment and gender, table 26 shows the percentage of females to males in high institutions in Nigeria. The table shows males dominance over the females, though the dominance might be said to be marginal. For admission into state-owned tertiary institutions, precedence is given to their indigenes in their admission process. They are first admitted before others are considered because they are given lower cut-off marks relative to others. Also, non-indigenes who get admitted pay more tuition fees and other fees than the indigenes. For Private tertiary institutions, they admitted based on the candidates score in the entrance examination. But because of the exorbitant tuition fees and other fees, the wards of the high income earners have better access to these private tertiary institutions than those from the low income earners. Precisely, to certain extent, in these private institutions, especially universities, admission is based on the ability to pay. Higher Education and Unemployment in Nigeria Despite the poor funding problems, enrolment at all levels of education has been on the increase (Moja, 2000). Hence the gap between registered unemployment and vacancies declared has been consistently high both for lower grade workers and the professionals and executives. The peak was recorded for lower grade workers in 1981. Apart from 1980 and1981, the vacancies declared for lower grade workers was consistently lower than 20, 000 while unemployment was largely greater than 100, 000. The situation with professionals and executives was not as worse as lower grade workers. Up to 1991, unemployed professionals and executives was not more than 20,000. A sharp increase was .recorded in 1993 when the figure rose to 108,153 largely because of mass retrenchment. Since then, unemployed professionals and executives have been greater the 20,000 every year. Nevertheless vacancies declared were largely below 10,000. For both low grade and professional workers, more than

One thing to note is that admission process in Nigeria is not biased towards gender, income, and language. In terms of location, a little bias exits in that after the admission process that is based on merit, some kind of quota is usually introduced. This is in terms of catchment area of some federal universities and in favour of some states that are regarded as educationally less-advantaged states. For state tertiary institutions, their admission policies are biased in favour of their indigenes. 18 Examinations in this respect include the West African School Certificate Examination, General Certification Examination, and the National Examination 19 This is a bench mark or pass-mark which a candidate must score before he can be offered admission.

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50% of unemployed citizens had no vacancy for which they could be considered every year and the inflation rate coupled with lack of adequate fund to start business hinder the growth of self employment as an option. It has been discovered that increase in total enrolment contrast sharply with decline in funding of education (Sambo, 2005). This has led to training of many school leavers without any vacancy for which they can be employed. Precisely, table 27 shows that access to tertiary institution may reduce the possibility that one may be unemployed. CONCLUSION Increasing the average educational attainment of residents is likely to have significant economic development benefits. Therefore, government should identify policies to increase the proportion of individuals who are able to successfully obtain tertiary education. These education policies may have greater economic benefits if accompanied by some complementary policies. For instance, a more fundamental way to alter the incentives of higher education institutions is to base more of their core funding from the on various student outcomes. Some portion of the funding for higher education could be conditioned on the numbers of students who graduate, whether they are employed by the government or not. This argument can be supported given both the private and social returns to higher education, which was encouraging. REFERENCES [1] Amonoo-Neizer, Eugene H. (1998) Universities in Africa: the need for adaptation, transformation, reformation and revitalization. Higher Education Policy, 11, 301-309. [2] Anyawun, J.C., A. Oyefusi, H. Oaikhenam and F.A. Dimowo (1999) Structure of the Nigeria Economy. Onitsha: Joanee Education Publishers [3] Aromolaran Adebayo B. (2000) Private Wage Returns to Schooling in Nigeria: 1996-1999. Economic Growth Center Discussion Paper No. 849, Yale University http://www.econ.yale.edu/~egcenter/ [4] Balami D. H. (2002), Public Expenditure on Education: state level analysis for Enugu, Kano and Oyo States of Nigeria. (Mimeo) [5] Barro J. Robert and Xavier Sala-i-Martin (1995). Economic Growth. New York: McGrawHill. [6] Becker, G.S. 1964. Human Capital, Columbia University Press, New York.

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