The Impact Of Educational Expenditure On Economic Growth In Nigeria

Project and Seminar Material for Economics

The Impact Of Educational Expenditure On Economic Growth In Nigeria


This study inspected the connection between educational expenditure and financial economic growth in Nigeria utilizing time series and secondary data from 1981 to 2018, sourced from the Central Bank of Nigeria (CBN), and the World Bank. Significant measurable apparatuses were utilized in investigating the connections between these factors. Stationarity attributes of the factors were tested utilizing the Augmented Dickey Fuller (ADF) procedure on reviews. The relationships between educational expenditure, and economic growth were test through Ordinary Least Square analysis and Granger Causality test. The study had two hypothesis and its population was Nigeria. Several similar literatures were reviewed to aid in the analysis of our data. The discoveries show that educational expenditure has no causal connection with economic growth. The outcome additionally demonstrated that educational expenditure has a negative and inconsequential relationship with economic growth. The examination credited these discoveries to the way that educational expenditure during the time of study was twisted by superfluous factors, for example, strategy inefficiencies, poor financing, and funds misappropriation, and so forth. The investigation suggests that in accordance with global norms, the educational sector of Nigeria requires an institutional change as far as strategy detailing, execution and tracking finances. Likewise, need must be given to other genuine causal elements to economic growth.

Chapter One


1.1 Background of the Study

The Quality of education in Nigeria has been a major cause of concern for the people. Most government schools are massively underfunded, which has created an inconducive learning environment, which consists of, poor educational infrastructure, lack of learning materials, and underqualified teachers. Beyond this, a massive number of children in the country do not have access to an education. As indicated by the UNICEF yearly report of 2019, there are about 12.9 million children of elementary age, who are as of now are out of school. Net Attendance Rate (NAR) was more terrible among young girls (58.8%) contrasted with their young boys (62.2%). An expected 2.9 million school-matured kids need training centred on compassionate help. Regardless of a critical increment in net enrolment rates lately, it is assessed that 10.5 million kids are out of school in Nigeria. Expanded enrolment rates have likewise made difficulties in guaranteeing quality education and acceptable learning accomplishment, as assets are spread all the more meagrely, over a developing number of students. A major macroeconomic goal of every nation, is to improve the level of economic growth by maximising output. Education is vital because it has a positive effect on human capital, which leads to an increase in productivity and an elevated level of economic growth. Human capital can be fundamentally explained as any skill or knowledge that makes an individual more productive. An educated workforce will be able to increase productivity because, it will be inclined to avoid unhealthy practices and habits that hinder maximum productivity. Education improves health, productivity and access to paid employment. (Anyanwu et el, 1997). The quality of education and training of labor in a country, is a key determinant, on how developed the economy of the nation is and the its level of economic growth. Studies have shown correlations between human capital and level of economic growth. According to the human development index of 2018, which measured economic productivity and also human capital by combining indexes of education and health in Human Development Index, showed that, there is a positive links between human capital and economic output.

1.2 Statement of the Problem.

The Nigerian economy vigorously relies upon oil exports. With worldwide oil costs plummeting, the Finance Minister Zainab Ahmed expressed in March of 2020 that the current year’s record 10.59 trillion-naira ($29.42bn) financial plan would be cut by around 15 percent. At that point, she said the underlying expected oil cost of $57 a barrel would be diminished to a most dire outcome imaginable of $30 a barrel. Due to this massive decline in oil price, the need to diversify the economy is greater than ever.

To solve this problem, the government will have to make education a priority. The Keynesian Theory suggests that public expenditure should have a positive effect on economic growth.

Consequently, educational expenditure should have a correlation with sustainable economic growth. Iyoha and Itesde (2003) support this statement by regarding the human factor and level of education as the first and key determinants of a country’s level of economic development.

The Nigerian government has borderline ignored the educational sector. Nigeria has one of the lowest expenditure commitments to education in Africa and by implication the world. In 2022, education accounted for 5.2% of the National Budget. UNESCO’s benchmark for education is 26% of the annual national budget and Nigeria has consistently fallen short of this requirement as it allocated 10.7% in 2016, 6% in 2017, 7.1% in 2018 and 5.9% in 2019 and 5.2% of the 2020 budget has been allocated to education, of which approximately 85.2% of the total allocation accounts for recurrent expenditure (Ciuci Consulting, 2020).

The outcomes of lacking financing of instructive area can’t be over accentuated. The inadequate funding of education sector which reflects in the area of poor state infrastructural facilities, irregularities of teacher’s remuneration, inadequate staffing etc. has resulted to intermittent strikes by some unions including the Academic Staff Union of Universities (ASUU), Academic Staff Union of Polytechnics (ASUP) and Non-Academic Staff Union of Universities. This scenario has the ability to increase the rate of illiteracy in the country and reduce the marginal productivity of workers. Therefore, to break out of the vicious circle, there is need to ascertain education impacts on skills and competencies that is central to human development and enhanced worth of life, transporting wide variety benefits to both individuals and societies.

1.3 Research Question

The following research question will guide the study:

  1. Is there a relationship between educational expenditure and the level of economic growth in Nigeria?
  2. Is there a causal relationship between educational expenditure and economic growth in Nigeria?

1.4 Objectives of the Study

The aim of the study is to investigate the impact of educational expenditure on economic growth In Nigeria. The study specifically sought to achieve these objectives:

  1. To investigate if there is a causal link between expenditure on education and economic growth.
  2. To determine the nature of the relationship between educational expenditure and economic growth in Nigeria.

1.5 Statement of Hypothesis

  • H0: There is no causal relationship between educational expenditure and economic growth in Nigeria.
  • H01: There is causal relationship between educational expenditure and economic growth in Nigeria.

1.6 Significance of the Study

Nigeria is the most populated nation in Africa and one of the most populated in the world. The country also has very high illiteracy rate and a regressing economy. In order to boost and create a sustainable economy, the level of human capital in the country has to improve. This could be achieved by investing heavily in the educational sector.

This study will be of importance to policy makers because, it will provide them with information on the impact of education on economic growth and as such aid in policy formulation.

The study could also beneficial to educational authorities and administrators, as it will help propel reforms and transformation where necessary.

1.7 Scope and Limitations of the Study

The research is basically for the economy of Nigeria. The study dwelt mainly on the educational expenditure of Nigeria. Other variables were introduced as may be required at a particular point in time. The time frame for the study ranged from 1980 – 2018.

1.8 Definition of Terms

Economic Growth:

This is an increase in the production of goods and services in a country over a specific period of time. It is usual measured in terms of nominal or real gross domestic product.

Gross Domestic Product (GDP):

This is the overall monetary value of all the goods and services produced in a country over a specific period of time. GDP is usually calculated on an annual on quarterly basis.

Educational Expenditure:

This refers to the amount allocated by the federal government for education. This covers any expenses by or on schools, universities and other public educational institutions. Educational expenditure is divided into recurrent and capital expenditure.

1.9 Organisation of the Study

This study is arranged in five chapters. Following this introductory chapter, chapter two provides the literature review and the theoretical framework. Chapter three specifies the research methodology used in achieving the objectives of the study. Chapter four provides the analysis of the empirical results. Chapter five is the conclusion of the study which provides a summary of the major results, reaches a conclusion based on the findings. It will also identify policy implications of the findings and provide policy recommendations.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary of Findings

The investigation looks at the effect of expenditure on education on economic growth. The introduction gives the foundation of the investigation and the examination issues. The principle goal of the investigation is to decide the connection between educational expenditure and economic growth. The theories provided guidance to the examination. The initial segment of the work additionally archives data on the criticalness, extension and territories of the examination.

Assessment of similar literatures introduced data on the system strategy, and methodology utilized in other investigations. These incorporated the exploration configuration, model detail and wellsprings of information, organization of instrument, and technique for information investigation.

Then the result analysis and conversation which zeroed in on the exhibition of information addressing the examination questions, introduction and examination of data to test the hypothesis, rundown of discoveries, and conversation of discoveries. The investigation finished with a rundown of all the five (5) sections, the end, the proposals, the impediments, recommendations for additional examinations and commitments to information.

5.2 Conclusion

The study set out to determine the nature of relationship between educational expenditure (EDX) and economic growth (RGDP). It also investigated the causal link between the variables. The study concluded that educational expenditure has a negative and insignificant relationship with economic growth. The study provides results that show that there is no causal link between educational expenditure (EDX) on economic growth.

In conclusion the findings, suggest that educational expenditure is insignificant in achieving economic growth, and also is not a real causal factor which leads to economic growth.

5.3 Recommendation

Following the discussion of the findings of this study, several recommendations and suggestions are suitable to improve the Nigerian economy.

  1. The Nigerian educational sector still requires adequate funding. There is need for the government to increase the level of funds directed to this sector. This study recommends that the Nigerian government gradually increases the share of educational allocation from the budget, to match the benchmark of 26% set out by UNESCO.
  2. The issue of corruption in the country is also prevalent in the educational sector. This result to the inefficient impact of educational expenditure on the public, limiting the influence on economic growth. This study recommends efforts to be made, to improve the efficiency of the expenditures, allocated to the education sector.
  3. This study also recommends that the government should focus on other factors, that have real causal impact on economic growth. These factors include, technology, security and power. These are aspects of the country’s economy, that if improved will have a massive impact on economic growth.

5.4 Suggestion for Further Research

This study investigated the nature of the relationship between educational expenditure and economic growth. Further research could be carried out on this particular topic, using a different variable like nominal gross domestic product.

Other studies can investigate the issue of efficiency, in an attempt to discover the role corruption plays in the efficient use of government expenditure. The quality of education, is also an important aspect to research. It is also imperative to examine the level of enrollment rate in different educational levels and its impact on economic growth.

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