THE IMPACT OF EDUCATIONAL EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the Study

It is widely acknowledged that, education is an important determinant factor of economic growth. Prominent classical and neoclassical economist such as Adam Smith, Romer, Lucas and Solow emphasized the contribution of education in developing their economic growth theories and models. The main theoretical approaches of modeling the linkages between education and economic performance are the neoclassical growth models of Robert Solow (1957) and the model of Romer (1990). Apart from the theoretical aspects, numerous empirical studies have focused on the issue of education and economic development. According to Ismail (1998), education is considered as a long term investment that leads to a high production for a country in the future. In fact, economists argued that advanced education sector will certainly lead successfulness of a country’s economics and socials development. Therefore, most of the developed and developing countries emphasize the enhancement of educational sector. Nigeria has no exceptions in developing and enhancing its educational system in order to be a world class country (Ibrahmim and Awang, 2008). Nigeria’s commitment in developing its educational sectors has been tremendous. This can be seen from Nigeria’s annual budget allocation. Nigeria has allocated significant amount of budget for education sector and it keep increasing for each budget session. What can be learnt is that, from 1989 there have been consistent increases for Nigeria’s educational budget allocations. Despite the financial turmoil that badly affected Nigerian economy in which had devaluated Nigeria currency, government’s allocation for the educational sector has never been reduced. In fact it has been increasing. Emphasizing on educational sector has been successful as it plays important roles in achieving National development agenda and contributed to a country’s economic growth. Sheehan (1971) has listed some direct benefit that country’s gain from education. This includes increases in productivity, labors’ income, country’s economic growth and literacy rate. In addition, education could also improve efficiency of income allocation as well as labor’s mobility and transfer in accordance to work demand of trained workers.

Nigeria is a multi-ethnic group but consisted of three major ethnic groups namely, Igbos that inhabited there Eastern part of the country, Hausas which inhabited the Northern part and Yorubas at the Western part.

Before the coming of the colonial masters, Nigeria practiced a traditional educational system which comprises of teachings based on religious background (Islam and Christianity). Essentially, the major aim of traditional education was to foster good character in the individual member of the society for them to be useful in the larger society. For instances, local stories and folktales were frequently told and references to ancestors who demonstrated the “act of legendary”. Notwithstanding that this system was a hallmark for the preservation of socio-cultural values and norms but the system fail to make room for critical thinking and research development. Since much valuable time are wasted as a result of unnecessary long period of training thereby impending the development of the child’s potentialities.

After the demise of slave trade in 1806 as a result of missionaries resettlement and rehabilitation plans. These Christian Missions included Church Missionary Society (CMS), Methodist Missionary Society (MMS), the Roman Catholic Mission (RCM) and others. They preached the mysteries of reading and writing with the “Holy Bible” and its content as their principal reference materials and belief.

In Nigeria, Western education formally took-off at Abeokuta in today’s Ogun State by the establishment of a formal school in 1546 by the Church Missionary Society and ten years later, the Baptist Mission led by Reo Bowen arrived to established their own school, the Roman Catholics and others followed suit in establishment of schools in several parts of Nigeria.

Up until 1884, when Nigeria was formally made a colony of the British government, little attention was paid to the educational needs of the people as the entire Western education system was solely missionary affair. One of the immediate benefits of the early western education was that the graduates from the Christian schools secure white-collar jobs in the colonial establishments.

The national consciousness of the significance of education in Nigeria formed the basis upon which education expenditure became a matter of serious consideration. Since 1960 to date one of the major problems facing educational sector is low investment in the infrastructural, research grants and learning aid especially in the public schools. For several years now, educational industry has suffered tremendous neglects arising mainly from the ineptitude of education administrators at the various levels of government in Nigeria. According to Prof. Ukeje B.O “the problem of education is not only in terms of the economic factor of increasing demands in the face of decreasing resources but also in terms of political considerations.

On the foregoing promises, this paper work stands to present a framework in which policy interventions can be hinged in order to ameliorate the problem of poor financing and inconsistencies in the federal government’s educational expenditure pattern in Nigeria.

Statement of the Problem

The federal government allocation to education sector has declined steadily since 1999 and is much lower than the average in the last years of military rule.

Alternative source of financing education explored by the federal government is the Education Tax Fund (ETF) established in 1995. ETF ensures that companies with more than 100 employees contribute 2% of their pre-tax earnings to the fund. Primary education receives 40% of this fund, secondary education receives 10% and higher education 50%. Primary education has also in the past decades receives from the Petroleum Trust Fund (PTF) for capital expenditure and provision of infrastructural materials.

Despite all alternatives, the infrastructure and facilities remains inadequate for coping with a system that is growing at a very rapid pace. Due to poor financing, the quality of education offered is affected by poor attendance and inadequate preparation by teachers at all levels. Physical facilities such as libraries, laboratories, modern communication and information technology equipment have to be provided.

Objectives of the Study

The objectives of this work are:

Firstly, to find out the relationship between federal government educational expenditure and economic growth in Nigeria for the period of 1994-2011.

Secondly, to find the impact of federal government educational expenditure on economic growth in Nigeria.

Hypothesis of the Study

For the purpose of this study, the following hypothesis will be tested.

H0: Federal government expenditure has no significant impact on economic growth in Nigeria.

H1: Federal government expenditure has significant impact on economic growth in Nigeria.

Significance of the Study

The federal government annual expenditure to the educational sector is of great concern to all citizenry. This is because; educational expenditure has a significant impact on human capital development.

The study will be of great importance to policy-makers because it will make them to see the impact of education on national development and will make them to make policy adjustments concerning the education sector.

The study will also benefit the education authorities and administrators, as this will propel reforms and transformation where necessary.