CHAPTER ONE INTRODUCTION

1.1 BACKGROUND OF THE STUDY The educational sector of any economy is very vital in the bid for economic growth and development of any nation. Education has become more significant in growth with the emergence of the service/high-tech economy. It plays a crucial role in the development of human resources in terms of nurturing and enhancing the skills and capabilities of individuals.

The importance of education to human beings cannot be over emphasized. Education has been defined as all efforts, conscious and direct, incidental and indirect, made by a given society to accomplish certain objectives that are considered desirable in terms of the individual’s own needs as well as the needs of the society where that education is based. (Fafunwa, 2003)

Education is critical to the development of human capital, attainment of higher living standards, social integration and increased labour productivity through the adoption or adaptation of modern technology. Economic development theorists generally agree that the quality of human resources has a significant impact on economic development and growth. They are of the notion that the quality and quantity of labour determine production by virtue of it being a factor of production. As once remarked by Ola (1998), “If you see any economy that is not doing well, find out what is spent on education”. Psacharopoulos (1973), Coombs (1985) and Aboribo (1999) have all revealed in one way or the other that increase in national income and per-capita income is a function of education and that differences among nations can better be explained by differences in the endowments of human, rather than physical capital.

In most developing countries, educational investment is solely the responsibility of the public sector, and as such the government therefore provides the fund for the sector, although in recent times, private investments are being made to support public investments. However, the amount of fund government is able to disburse depends on the proclaimed interest for education, available fiscal resources, investment demands of other sectors in addition to the state of the economy. Hence, the allocation of funds to educational investment in many developing countries like Nigeria depends on the income of the nation. With the sharp increase in population, huge resources have been committed by the three (3) tiers of government (federal, state and local) towards raising the level of literacy with each depending to a high degree on the federal collected revenue and its distribution among them.

Education in Nigeria, to an extent, is a constitutional matter, which makes it the responsibility of the government though it is financed by the public sector in conjunction with the private sector and external bodies. It follows that the sources of education investment funds are majorly public in nature. One of the approaches adopted by the government in financing education is the annual budgetary allocation to the sector that are distributed as subventions or grants to the different levels of education. These grants or subventions to educational institutions are made through the respective Education Ministry at each levels of government by the coordinating agency of education such as the National Universities Commission (NUC).

With regards to the growing problem of poor academic standards, of very serious concern is the conclusion that cognitive achievement is low in African students by world standards and that the recent further decline in supplies of the key inputs at all levels, such as books and other learning materials has had deleterious (harmful) consequences in terms of quality of performance of students as identified in cross-national studies. There is every reason to believe that there is potential for substantial improvement of the internal efficiency of these systems with a reasonable increase in investment (Kwapong, 1995).

1.2 STATEMENT OF THE PROBLEM According to Hartshorne (1985), “…there is a problematic relationship between education and economics which the conflicting theories of the economists have done little to illuminate”. However, there is sufficient evidence to suggest that formal education makes a positive contribution towards economic growth. The term ‘national wealth’ has been amplified to accommodate human capital, as well as physical capital, as an independent factor of production necessary for high and sustainable economic growth rates.

However, in Africa, the rates of return on investments in education are estimated to be 26 per cent for primary education, 17 per cent for secondary education, and 13 per cent for higher education. These rates of return include public subsidies in total costs but do not attempt to include positive externalities in the benefits. Thus, they understate the true social rates of return.

With the introduction of Structural Adjustment Programme (SAP) in Nigeria in 1986, there was a substantial fall in investment on education in real terms. Although, the adjustment was supposed to address distortions in the economy and enhance the system of economic management but there has been a rather increasing but less than significant revolution in alleviating the problem of education financing in the country since then. Nigeria in her bid to meet up with the ‘International Goals of Education for All’, adopted at the “World Declaration on Education for All” at the Jomtien (Thailand) World Conference in 1990, has not yielded substantial fruits. The country is ranked first among the 21 countries at serious risk of not achieving education for all with primary education net enrolment ratio of less than 80 percent. The country is also known to be at risk with low adult literacy rate of less then 70 percent.

Nigeria was listed among low human development countries in the Human Development Report (HDR) of 2002, with an index of 0.462, and the public expenditure on education as percentages of Gross National Product (GNP) for the periods of 1985-1987 and 1995-1997 were 1.7 and 0.7 percent respectively. These figures for Nigeria in the two periods were the least among the 13 African countries under the Low Human Development with respect to expenditure on education. With this structure of investment in education, it will be an up-hill task for Nigeria to achieve sustainable growth and development (Awopegba, 2002).

Nigeria’s education system has suffered from policy neglect in the past two decades or more. Total expenditure on education in 2004 was less than 1 percent of Gross National Income (GNI) – far below the continental average of 4.71 per cent. Under-funding of the education system has left the school systems, including the formerly excellent universities, in deep crisis in terms of standards and facilities, both declining (Yaqub, 2005). Inadequate funding has resulted in problems such as the breakdown and deterioration of facilities, shortages of new books and current journals in the libraries, supplies for the laboratories, and limited funding for research.

The root cause of the problems of education sector in Nigeria can be traced to poor financial investment. This was confirmed in the work of Central Bank of Nigeria (2000), which posited that inadequate funding has been the bane of educational system to the extent that budgeting allocations had been very low compared with others.

In the NEEDS (National Economic Empowerment Development Scheme) Programme, the Nigerian government became familiar with the fact that one of the main challenges facing the educational institutions in the country was inadequate funding, and as such the issue of investment in the educational sector is quite obvious.

The government has, however, started to address some of these problems. Increased spending on education and Universal Basic Education (UBE), aimed at providing free education for all pupils at the primary and junior secondary school levels, has enabled the rehabilitation of schools and contributed to improvements in school enrolment rates. The total gross primary-school enrolment rate increased from 98 per cent in 2000 to 120 per cent in 2005, while the total secondary-school enrolment rate rose marginally from 34 per cent to 36 per cent during the same period.

In spite of certain necessary conditions being met in financing the educational sector, there’s still the need for greater and insightful attentions to be focused on the need to maintain and expand educational infrastructure to accommodate the pressing need of a fast growing population.

1.3 SCOPE OF THE STUDY The study is purely constrained to the Nigerian economy with some little references to other countries (or continents), as the need arises. Educational Sector

Apparently, the study basically entails public investment in the educational sector and its relative and immediate effect in terms of economic growth and the scope of the study is restricted to the period between 1977 and 2004.

The research study will focus on the various activities and policies engaged by the government in financing the educational sector, mainly formal education, in a bid to improve economic growth. The study will also address issues of sustainability in public investment on education in the Nigerian economy. Educational Sector

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