As the population of Nigeria continues to exhibit strong growth, the pressure on public services, including education, will increase in the coming decade. Without further reform and attention, the state school system – currently underfunded and understaffed – is likely to come under severe stress.
Producing a competent and skilled workforce in which the attributes of graduates match the demands of the labour market presents the main challenge for Nigeria’s government. If it is able to adapt accordingly, it can capitalise on the current youth bulge, facilitating a rise in economic productivity and a drop in the dependency ratio. To achieve this, efforts must be made to bolster both attendance and outcomes in the education system.
The current administration is keenly aware of the challenges and has announced a number of policies to improve basic and fundamental elements of schooling, particularly from a demand-side perspective. While these measures may ameliorate certain elements of under-performance, the general condition and reputation of public schools is pushing many students towards the private sector. As such, significant opportunities exist for further investment and development of private education, from the primary level through to the tertiary segment.
Current Standards
Nigeria still has some way to go to align its basic education indicators with those of developed countries. As of 2013, the literacy rate was 76% for males aged 15-24 and 58% for females, according to the UNICEF. This is, at least in part, because school attendance continues to lag. For the years 2009-12, the primary school gross enrolment ratio in Nigeria stood at 88% for boys and 81% for girls, while the net attendance ratio for 2008-13 was much lower, at 62% and 57%, respectively. Worldwide, the average gross enrolment ratio for both sexes in 2012 was 108%. Even for the least-developed countries, as defined by the UN, the ratio stood at 105% in the same year, according to the World Bank. In sub-Saharan Africa, the average was 99.7%. Given this lag, it comes as little surprise that Nigeria also struggles at the secondary and tertiary education levels. The net attendance ratio for secondary school between 2008 and 2013 reached 53% for males and 45% for females.
These education indicators are particularly pressing given the demographic trends in the West African nation. The population is growing at 2.7% per year and is projected to reach an estimated 440m by 2050, ranking it as the third-most-populous country in the world, according to the UN.
Consequently, Nigeria is a young country, with a median age of just 19. A substantial 43% of the population is under the age of 15, while a further 19.4% is under the age of 25. As such, the country has an extremely high dependency ratio of 87.7%, which places substantial pressure on public services, including the education system.
Education Funding
One of the fundamental challenges for the sector is funding. The federal budget allocation for education has shown little movement in the last six years. In 2011 it stood at N306.3bn ($967m), increasing to N369bn ($1.2bn) by 2016. The budget allocation for 2016 actually represented a drop of 25% from the previous year, due in large part to the negative effect on the economy caused by the ongoing dip in oil prices.
Moreover, as with many areas of government, the utilisation of budgetary allocations has been problematic. According to the Centre for Social Justice, a local NGO, between 2009 and 2013 only 44.7% of the total capital budget released for the education sector was used. This compares to a figure of 55.4% for the overall budget. Furthermore, between 2010 and 2014 education spending by the federal government amounted to just 7.8% of total aggregate spending, or 0.5% of real GDP, according to “Financing Education in Nigeria”, a case study prepared for the Oslo Summit on Education for Development in 2015.
While these figures do not capture the total funding for the sector, given further allocations from state governments and national bodies, such as the Universal Basic Education Commission and the Tertiary Education Trust Fund – which together injected around N100bn ($315.7m) into basic and higher education in 2015 – it does point to the difficulties facing the sector, with spending on education likely to fall short of the requirements to support and reform it. In 2015 Peter Okebukola, former executive secretary of the National Universities Commission, told local press that across all public sector funding agencies, the government should be aiming for a 30% allocation to education. In 2015 the planned spend was an estimated 23%, according to Okebukola.
Funding is also hampered by the lack of clear policies on funding between different levels of government. The state governments, for example, often leave primary education funding to local governments even though this falls under their remit. The leading states of Lagos, Kano and Yobe spent an average of 15.68% of their budgets on education between 2010 and 2013, according to the “Financing Education in Nigeria” report. However, only 0.57% of these funds were spent on primary education. As such, the lack of a clear delineation in financing roles between different levels of government is another reason for underfunding in the sector.
Staffing
The current administration of Nigeria has announced several policies to improve the education system from the primary level through to university. Central to these efforts are plans to bolster staffing levels in schools. During his 2016 budget speech, Muhammadu Buhari, the president of Nigeria, announced that 500,000 new teachers would be employed, primarily in rural areas. Through this initiative the government hopes to tackle both the issue of persistent graduate unemployment and the lack of teaching staff in the public education system.
Although this programme falls short of what is required to meet the demand for qualified teachers – case studies have estimated that Nigeria needs to spend $1.8bn to meet teacher staffing requirements – the new announcement will be welcome news. The move could also improve pupil-to-teacher ratios. According to the National Bureau of Statistics, there were, on average, 40 pupils per teacher in primary schools and 26 pupils per teacher in junior secondary schools in 2014. Meanwhile the “Financing Education in Nigeria” report found that the ratio increased to as many as 300 pupils per teacher in some institutions in the country, although did not give specific details on which ones.
The government is working to ensure that educational training facilities are equipped to handle the new influx of teachers. As of 2010, the latest date for which statistics are available, only 66.2% of primary school teachers in Nigeria were trained. As a result, in February 2016 the British Council offered to work with the federal government to train the 500,000 new instructors, although there are no public details available on the cost and content of this training programme. “We need to think of what is good for modern Nigeria in some ways. We need to think through how we can work through the education system, which is growing rapidly, and training the 500,000 teachers the government plans to hire,” Ciarán Devane, chief executive of the British Council, told local press in Abuja in February 2016.
Skills In Demand
President Buhari’s other major policy announcement in the field of education focuses on the tertiary system. During his budget speech, the president announced plans to make university education free for students in the fields of science, technology and education. The move is part of a strategy designed to help align the output of future graduates with the demands of the labour market. As part of this process, the government is also focusing on technical training, with plans to increase the number of vocational training centres in the country (see analysis).
The government hopes that by offering free education to students in the science and technology fields, the country can produce more suitable graduates to fill vacancies in industry and the extractive industries. Under the plan, the government will offer a conditional cash transfer to as many as 1m poor and vulnerable student across the country to help meet their university financing requirements. Eligible students will receive N5000 ($15.79) per month, as well as a further bursary award.
Demand-Side Issues
Such a move gets to the heart of one of the major challenges of education in Nigeria – affordability. Education is compulsory for the six years of free primary education and the three years of junior secondary school in Nigeria. This is followed by three optional years of senior secondary education and then tertiary education. However, enrolment, attendance and graduation rates throughout the system are hampered by the low incomes of students. Although Nigeria has arguably the largest economy in Africa, making up 75% of West Africa’s GDP, the latest available data from the World Bank states that in 2009 around 48% of Nigerians were living below the national poverty line. In 2015 GDP per capita was measured at N383,000 ($1210). This not only impacts students’ ability to pay fees in the higher education system, but also hinders them from meeting the associated costs of school, such as books, clothing and food. Indeed, despite free universal basic education, students still spend an average of $200 on books and uniforms.
According to a study by the US Embassy in Nigeria, monetary cost was the leading factor influencing primary school students’ decision to leave school, accounting for 32% of all dropouts. Other financial factors inhibiting attendance included the need to work (16%) and an unfavourable distance to the nearest school (7%). Therefore, cost-associated concerns accounted for the majority of non-attendance, even at the primary level where education is free.
Free Meals
The government is well aware of this issue and is trying to tackle the problem in various ways. In addition to scholarships at the tertiary level, it is also planning to offer one free meal a day to all primary school students. This will be achieved through the re-introduction of the Home Grown School Feeding programme, an initiative of Imperial College London’s Partnership for Child Development. The programme seeks to supply schools with locally grown food in order to bolster agricultural economies and support childhood nutrition in schools. The federal government is also using it as a tool to further boost school attendance.
Private Schools
Despite the challenges of public school attendance and income limitations, private schooling is thriving across the country and shows substantial potential for further growth. According to a report by the Parthenon Group, a UK-based strategy consultancy, private education in Nigeria accounts for 40% of primary and secondary schooling, a rate only matched in Africa by Kenya and Ghana. As such, with a 184m-strong population that is expected to grow to become the world’s third-most populous by 2050, according to UN projections, the West African nation offers a great deal of potential for investment in the sector compared to other emerging markets, like Mexico and Brazil, where the rates are 13% and 14%, respectively.
Furthermore, a large portion of demand for private education is currently lost to foreign institutions, which offer Nigerian students a certain standard and level of prestige. The education sector loses as much as $2bn in potential revenue to foreign institutions per year, according to press reports.
In the country’s main urban areas, the environment is even more fertile for private education. Private schooling already accounts for 43.6% of children being educated in urban areas, according to ICEF Monitor, and shows no signs of slowing down. In the three years to 2014, the number of independent schools in the capital, Abuja, increased by 275% to 3000. In the commercial capital of Lagos, private schools outnumber their public counterparts by more than seven to one. Indeed, there are at least 12,000 private schools in the city, with some estimates putting the number of low-cost private schools at 18,000, according to media reports.
While private operations are present throughout the system, they are particularly prevalent at the higher grade levels, accounting for 52.5% of senior secondary schools and 43% of universities as of May 2015. Furthermore, as the middle class grows, demand for these services is likely to increase. Global consultancy McKinsey estimates that more than 2m households in Nigeria earn an annual income of over $10,000, making up as much as 18% of all households in urban areas. Households earning more than $5000 per year – the emerging middle class – will reach around 27% of the population by 2020.
It is hardly surprising, then, that low-cost private schools, with fees averaging N7000 ($22.10) per term according to The Economist, are prospering. Many private institutions – at all levels – are cost competitive. At the tertiary level, the cost of education per student is often lower in private institutions than at public universities, Jide Owoeye, pro-chancellor of Lead City University in Ibadan, told the press in September 2015. Although this helps private operators expand their target market and reach down the income scale to generate demand, it is not without its challenges. Private education institutions struggle to some degree with perceptions of quality and reputation. In many cases, these concerns are well founded. As such, the UK’s Department for International Development has rolled out the Developing Effective Private Education in Nigeria programme in Lagos State, aimed at improving learning outcomes for the 1.5m children attending low-cost private schools there. The project, which has a budget of £15.9m, was launched in 2014 and will run until 2018.
Post-Graduate Opportunities
Private providers are also starting to take advantage of existing opportunities in the post-graduate space, which is still an underserved market. Until 2015 there was just one locally owned business school in the country, Lagos Business School. “Our competition is predominantly foreign. We’re competing with global institutions,” Olayinka David-West, academic director at Lagos Business School, told OBG.
According to CNN, as much as 20-30% of the business school market is captured by foreign institutions, including distance-learning programmes. Yet, there is significant local demand. The African Management Initiative (AMI), a Johannesburg-based institution, has set the target of creating 1m business managers in Africa by 2023. One of the biggest challenges in reaching this target is the relative lack of appropriate education institutions on the continent. As of 2013 there were just 90 schools in Africa offering a Master of Business Administration (MBA), compared to 1500 in India, according to the AMI.
For business schools in Nigeria, the limited business education landscape on the continent cuts both ways. While there is a reputational challenge, especially compared to international institutions, the lack of regional competition offers opportunities to attract students from across Africa. “We do recruit African students from places such as Ghana and Cameroon,” David-West told OBG. However, there is a challenge for Nigerian schools to compete on cost. “Compared to the US and the EU, we are not priced very highly. But compared to South Africa, we are a little high,” she added. This is because operational expenses, which are funded exclusively by student fees, are high. Personnel, power and infrastructure are the main cost concerns for schools.
Despite these challenges and the negative effect on the economy caused by the drop in oil prices, local business schools continue to perform well. Corporations fund a large number of executive MBA students at the Lagos Business School. Even as the business environment deteriorated in 2015, the number of enrolled students for the degree grew by 40%. This is attributable to a large degree to the weakening exchange rate, which makes international courses priced in dollars more expensive.
This is a clear illustration of the potential in the market, if local institutions can successively capture a greater share of the students that look overseas for further education. The financial key performance indicators for local private institutions reflect that: Lagos Business School, a not-for-profit institution, sets a target of less than 15% returned income, while maintaining a further 15% cushion of liquidity.
Outlook
This niche educational space points to the wider potential of the Nigerian education market. With robust population and income growth, demand for private education throughout the system, from the primary level to post-graduate degrees, is very strong. Unsatisfactory outcomes in the state system are also driving demand for independent schools. However, private operators face substantial competition, not only from fellow Nigerian educational institutions, but also from overseas.
Indeed, the current large-scale spending on overseas education is one of the clearest signs that a lot of potential lies in the local market. If the quality of schools in Nigeria can be further improved and their reputation built, there will plenty of opportunities for investment in private schools across the country.
Read More from OBG
