Impact Of Education In The Development Of The Nigerian Economy

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Impact Of Education In The Development Of The Nigerian Economy


This study investigates the relationship between government spending on education and economic development in Nigeria using annual time series data for the period of 1981 to 2013 sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. Using Johansen`s co-integrated test it was established that there is evidence of long run relationship between GDP and government spending on education. The long run coefficient of both capital and recurrent expenditures are statistically significant and are positively related to growth. The error correction term is negative and statistically significant. This suggests there is no sign of any problem in the adjustment from short run to long run equilibrium. The test for Granger causality also shows evidence of a bi-directional causality between recurrent expenditure and economic growth and a unidirectional causality running from capital expenditure to GDP as a proxy to economic growth. We therefore concludes that both capital and recurrent government spending on education positively influenced economic growth in Nigeria over the period under study and hence the paper recommends that, government should increase budgetary allocation on education expenditure in general in order to improve its effect on the growth of the Nigerian economy.

Chapter One


1.1 Background of the Study

Education is an age long phenomenon in all societies although it may take various forms from one society to another. In Nigeria two forms of education were in existence before the advent of colonialism. They were indigenous education and Islamic education. Traditional education as was practiced in the southern and some parts of the middle belt Nigeria, consisted essentially of general but informal training in character, norms, agriculture, fishing intellectual and other ways of life as approved by society. Islamic education on the other hand was practiced mainly in Northern part of Nigeria. It is based on the Quran.

Both forms of education preceded the Western education which was introduced to Nigeria in the 19th century by the European Christian missionaries. The advent of colonialism brought about formal education in Nigeria. The colonialists had to organise the training of the indigenous people to understand the Queen’s language. The Christian missionaries organised schools and trained Nigerians the art of reading and writing. The initial persons that were trained in the communities became the first indigenous persons to be employed by the colonial government as interpreters, clerks and teachers. It did not take long before the benefits of formal western education became manifest in Nigeria.

The regional governments of independent Nigeria expanded educational opportunities, building more schools and providing grant-in-aid to missionary schools in their respective regions especially in the southern regions. Expanded educational facilities were seen as the panacea to the manpower needs and overall development in post colonial Nigeria. The role of human capital formation in economic development has long been recognised in the literature. According to Harbison (1973, p.3), “human beings are the active agents who accumulate capital, exploit natural resources, build social, economic and political organisations and carry forward national development. Clearly, a country which is unable to develop the skills and knowledge of its people and utilise them effectively in the national economy will be unable to develop anything else”.

Several other theoretical and empirical studies have found a positive correlation between human capital development and economic growth ( Lucas, 1958; Romer, 1990; Barro, 2001; Abbas and Foreman – Peckb 2007). Education – formal and informal, contributes to skill acquisition. Informal education begins at the household level where children are taught how to sweep, clean their environment, fish or farm. By participating in these activities they learn how to do things by themselves and contribute to family income growth. Although such incomes are not recorded in national income accounting, they nevertheless amount to substantial family income.

According to Schultz (1962), formal education is a kind of investment in human being that enables them to acquire skills. Such skills raise the marginal product of the worker itself and also help to raise the marginal product of the other co -operant factors. Thus human capital has a unique character – it enters the production function as a factor of production and also as a marginal product augmenting variable. The latter makes the marginal rate of return on capital and other inputs rise continuously so that the unexplained growth rate explains the Solow’s surplus

1.2 Statement of the Problem

The educational sector in Nigeria is plagued by many problems. This is attributed to the attention given to education by the Nigerian governments (both past and present) is relatively low. Even many years after independence, it is stunning to know that the adult illiteracy rate is still at 74% (Ibidapo-Obe, 2007) and the gross enrollment rate is also low. The minimum amount to be spent by a country on education as stated by the United Nations (UN) is 26% of the country’s annual budget. Ironically, according to the data by Herbert (2002) from 1977-1998, the total education budget represented an average of 9.7% of total government expenditures, while its percentage share of the GDP from 1991-2009 has maintained a value of 0.85%. Its highest value was 5.11 % in 1981 and its lowest was 0.85% in 1991 (UNESCO, 2011).

Looking at the statistics above, it is clear that expenditure on education is still very low. Another pertinent issue in the Nigerian educational sector is that of teacher education. The basic problems reported by surveys carried out in various research in Nigeria have shown the discrepancy between the demand for teachers and the supply for teachers, and that teachers fail to meet the minimum requirement as stated by the National Policy For Education. This is due to lack of incentives, brain-drain and lack of motivation (Ibidapo-Obe, 2007). According to Dike (2002), he noted that the Federal Government reported that the falling standard of education in Nigeria is caused by “acute shortage of qualified teachers in the primary school level.”

It was reported by the same author, that about 23 percent of the over 400,000 teachers employed in the nation’s primary schools do not possess the Teachers’ Grade Two Certificate, even when the Nigerian Certificate of Education (NCE) is the minimum educational requirement one should possess to teach in the nation’s primary schools. It is no wonder then that Nigerian students do not generally perform well in most (external) public examinations. Almost every year, the Chief Examiners Reports (CER) for the West African Examinations Council (WAEC) and the National Examinations Council (NECO) highlight the abysmal poor performance of students at the Senior Secondary School Certificate Examinations.

Added to this poor performance in those public examinations, is the widespread vice of examination malpractice, which is indicative of poor and inadequate preparation for examination. When students have not read widely and thoroughly and have not been well prepared for examinations, the tendency is to turn to short-cuts and sharp practices in order to pass examinations.

1.3 Objectives of the Study

To ascertain whether education impacts on the development of Nigerian economy significantly.

1.4 Research Questions

Does education significantly impact on the development of the Nigerian economy?

1.5 Research Hypotheses

HO1· : Education does not significantly impact on the development of the Nigerian economy.

HO2· : Education significantly impacts on the development of the Nigerian economy.

1.6 Significance of the Study

The above mentioned problems constitute the basis for this research work which aims at examining the impact of government expenditure and teachers’ educational qualifications on the educational sector using different methodological approaches emanating from adopted data.

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

1.7 Scope / Limitations of the Study

This study covered the impact of education in the development of the Nigerian economy.

Limitations of study
1. Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection through the internet, questionnaire and interview.

Time constraint

The researcher simultaneously engaged in this study with other academic work. This consequently cut down on the time devoted for the research work.

1.8 Definition of Terms


The process of receiving or giving systematic instruction, especially at a school or university.


The process of developing or being developed.


The state of a country or region in terms of the production and consumption of goods and services and the supply of money.

Chapter Five

Conclusion and Recommendations

Considering our result from various tests and estimations, we can therefore conclude that government expenditure on education both capital and recurrent positively influence economic growth in Nigeria and that although capital expenditure is not statistically significant in the short run due to its insufficiency, its effect is significant in the long run. Thus, there is the need to increase spending on capital expenditure in order to raise the growth level of the economy.

We can understand from the empirical result that there is need for government to increase budgetary allocation on education expenditure in general in order to improve its effect on the growth on the Nigerian economy.
The study also recommends that, emphasis should also be given to provision of capital goods and other overhead capital that are also very significant in improving the standard of education in the economy

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