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The Role of Higher Education in Human Capital Development

Article in SSRN Electronic Journal · January 2013

DOI: 10.2139/ssrn.2380878

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The Role of Higher Education in Human Capital Development in Nigeria

Olugbenga S. Adedeji (Ph.D)

Department of Educational Management,
University of Ibadan, Ibadan

and

Omolara A. Campbell (Ph.D)

Department of Economics,
Lead City University,
Ibadan, Oyo State

Electronic copy available at: http://ssrn.com/abstract=2380878

Abstract: This paper confirms earlier position that higher education is a sine-qua-non for human capital
development and economic growth. However, the paper posits that the form of education that will
translate to economic growth, especially, in Nigeria must place emphasis on the access to, content and
openness of the education programmes to labour market demand. In today’s world, human capital
development is crucial for attaining a sustainable economic growth and development. To create a
knowledge based economy, in the light of technological advancements and globalization, there is the
inevitable need to increase innovative capacity and transmission of knowledge. Higher Education is a
prerequisite for the production of highly competent experts, which in turn, contributes to the
development of organizations and the economy at large. Higher Education therefore is expected to play
an important and increasing role in the development of Human Capital of a nation. Nevertheless, the
problem of inability to gain access into university, inadequate funding and the mismatch between
university programmes and the labour market demand have become serious and alarming issues to
parents, policy makers and the society at large. This paper, therefore, examines the nexus between
higher education (HE) and human capital development. The paper proceeds to identify the challenges
confronting HE and human capital development in Nigeria and proposes, in particular, the diversification
of HE curriculum to meet the need of the labour market and generate a wider fiscal space for the
nation’s economic development. Finally, the paper recommends the introduction of Public - Private
Partnerships in HE in order to improve the performance of the educational system in general and
increase the payoff from higher education investment in particular.

Key Words: Human Capital, Higher Education, University Education, Access

Introduction
Knowledge has become the most important factor for economic development in the 21st century.
Through its capacity to augment productivity, it increasingly constitutes the foundation of a
country’s competitive advantage (Porter 1990). Education plays a great and significant role in the
economy of a nation. Thus, educational expenditure constitutes a large chunk of the nation’s
budgetary allocation. In this regard, education has always been seen as playing an important role
in furthering economic and particularly human capital development of a nation. Additionally,
education is one of the decisive factors in life chances, equal opportunity and advancements. It is
the most powerful instrument for developing and empowering the citizens to master their social
and cultural environment and compete for survival. It increases individual’s chances for

Electronic copy available at: http://ssrn.com/abstract=2380878

employment in the labour market and allows them to reap pecuniary and non-pecuniary returns
and gives them opportunity for job mobility (Schultz, 1961; 1982).

However, most of the developing economies, although conscious of the transformation, which
education brings, are yet to reap its full potential. This is because the capacity to generate and
harness knowledge in the pursuit of sustainable development and improved living standards has
not been fully explored. Whereas, in OECD countries, where investments in the intangibles that
make up the knowledge base of a country (e.g., research and development - R&D, higher
education, computer software, patents) are equaling or even exceeding investments in physical
equipment, this change is most evident (OECD 2001). For instance, in 1996, OECD countries
accounted for 85% of total R&D investment; China, India, Brazil, and East Asia represented
11%; and the rest of the world only 4%. Advanced economies enjoy the fruits of a self-
promoting cycle in which the benefits of education help produce the wealth and public support
needed to enable continued investments (Romer 1990). In contrast, many developing countries
have neither articulated a development strategy linking knowledge to economic growth nor built
up their capacity to do so. Nigeria is one of these, although it is Africa’s largest country with 20
percent of the region’s population, Nigeria has only 15 scientists and engineers engaged in
research and development per million persons. This compares with 168 in Brazil, 459 in China,
158 in India, and 4,103 in the United States 1 . The question is what is the possibility that
Nigeria’s economic development will benefit from the emerging global knowledge economy
considering the abysmal performance of its educational industry? The government needs to
urgently realize that the principal mechanism for developing human knowledge is the education
system. Thus, Nigeria needs to invest huge sums of money on education not only as an attempt
to impact knowledge and skills to individuals, but also to impart values, ideas attitudes and
aspirations which may be in the nation’s best developmental interest.
Moreover, it is equally important to connect or analyze how education contributes to the growth
of national income and individual earnings. Adedeji and Bamidele (2003) listed three unique
features of education, which could translate to economic growth; these are content of education,
access to education and openness of education to labour market demand.

1
Saint, Hartnet and Strassner, 2003; quoting from World Bank 2002a: Table 5.11

3
  Content of education: that the needs of the society, in most cases, must determine the
contents of educational curriculum, which are transferred into individual participant of
educational opportunities. Education exposes human capital to various ideas, knowledge,
skills and attitudes that cut across all spheres of life through training and schooling.
 Access to education by many people: that education enhances human capital
development by providing access to a large number of the society, which in turn leads to
the production of large number of human capital resources needed for the creation of
accelerated economic growth.
 The openness of education to labour market demand: that education creates a “push and
pull” scenario between skill acquisition and demand in the labour market. This suggests
the need for adaptive university responses vis a vis the labor market for public and
private employment. However, Saint et al, (2003) citing from the work of Boateng (2002)
opined that “The supply of education services is market blind. Admission policies of
higher education institutions are not related to labour market requirements, nor to
individual student interests, but mainly to secondary school grades. Elsewhere in the
world, emerging institutional adaptations to the demand of labour market mismatch
include the formation of “knowledge coalitions” with other knowledge producing centers
in society (Clark 2001) the establishment of more effective labour market information
systems linked to career counseling in universities, and greater private sector involvement
in curriculum consultations, faculty attachments, student placements, and research
funding (Boateng 2002).

In today’s information societies, knowledge drives economic growth and development (IIEP,
2007). Higher Education (HE) is the main source of that knowledge - its production,
dissemination and its absorption by any society. Economic growth currently depends on the
capacity to produce knowledge based goods. However, the future of knowledge economy
depends more on their capacity to produce knowledge through research and development, rather
than on knowledge based goods. Hence, knowledge economies place greater value and accord
higher priority to the production and distribution of knowledge. Higher Education Institutions are
a major source for producing the human capital required for knowledge production. It is however
noteworthy today, that even if much knowledge is available at very low cost, its accessibility and

4
use depends on human capacity to process and absorb it. If a nation’s capacity to produce
knowledge is weak, its capacity to access and absorb it determines the pace at which that country
develops (IIEP, 2007). Higher education therefore, plays a crucial role in enhancing a nation’s
human capacity to absorb and use knowledge. Then, if knowledge is a source of economic
growth, disparities in its distribution become a source of inequalities among nations. Studies
have shown that income inequalities are high where enrolments in HE are low. Individual
benefits of HE include ensuring better employment, high salaries, and a greater ability to
consume and save. HE emerges as an important variable contributing significantly toward
improving individual earnings.

Mankiw, Romer and Weil (1992) in their studies have proved that HE has immeasurable impacts
on economic growth and development. In the first way, it increases the human capital inherent in
the labour force, which increases labour productivity and thus transitional growth towards a
higher equilibrium level of output. HE can increase innovative capacity of the economy and the
new knowledge on new technologies, products and processes; and consequently promotes
growth as presented in theories of endogenous growth (Lucas 1988). Also, HE facilitates the
diffusion and transmission of knowledge needed to understand and process new information. It
helps to implement successfully new technologies devised by others which again promote
economic growth. Proponents of human capital see it as the stock of economically productive
human capabilities which can be formed by combining innate abilities with investments in
human beings.

Based on this background, this paper attempts to examine the role of HE in human capital
development. Following this introduction, the next section exposes the details of Human Capital
Theory by its proponents while section three examines the nexus between HE and human capital
development. Section four presents the challenges facing HE and human capital development in
Nigeria. Finally, section five concludes and gives policy recommendations on how HE could
play effective role in human capital development in Nigeria.

II Human Capital Theory

This theory attempts to answer the question on “Why the decision to invest in education is

5
made?” The theory is therefore relevant at the decision making stages. The proponents of this
theory (Theodore Schultz, 1988; Garry Becker, 1967) see human capital as how education
increases the productivity and efficiency of workers by increasing the level of their cognitive
skills. In other words, they see human capital as the stock of economically productive human
capabilities, which can be formed by combining innate abilities with investments in human
beings. Examples of such investments include expenditures on education, on-the-job-training,
health and nutrition. Such expenditures increase future productive capacity at the expense of
current consumption. The provision of education is seen as a productive investment in human
capital, an investment which the proponents of the human capital theory consider to be equally
worthwhile than that in physical capital. The notion of education as a capital good is rooted in
this concept of human capital, which attached a high premium to human skills as a factor of
production in the development process. Human skill or productivity has been found by this
theory to be just as important an input in the process of development as finance, natural wealth,
and physical plant. The proponents of the theory have established that basic literacy enhances the
productivity of workers in low skill occupation. In this regard, an instruction that demands
logical or analytical reasoning, or provides technical and specialized knowledge, increases the
marginal productivity of workers in high-skill or professional positions. Thus, educational
choices may be assimilated to investment decisions where rational individuals decide on the
optimal amount of education they wish to acquire so as to maximize the net return to education.
Access to schooling ensures increase in the stock of human capital in the society. This enhances
national productivity and economic growth.

Additional schooling however is expected to generate benefits in terms of enhanced future

earnings, but also entail costs: direct as well as opportunity cost resulting from delayed entry into
the labour market. It is also noteworthy that the human-capital theory contends that education
participation/enrolment is an investment decision by which individuals forgo time and resources
in return for higher wages in future. People invest in education due to consideration they have
given to the future earnings streams that will result. From these submissions, it would be possible
for individuals or households to build up human capital by investing in education with the
expectation of deriving some satisfactory future benefits. Incidentally, such benefits would
include increased earnings, heightened social status, higher economic prestige associated with
higher educational qualifications such as a first, second and doctorate degrees. It can be inferred

6
from the foregoing submissions that basic literacy enhances the productivity of workers in low-
skill occupations. Furthermore, an instruction that demands logical or analytical reasoning, or
provides technical and specialized knowledge, increases the marginal productivity of workers in
high-skill or professional positions.

Few studies have investigated the rate of return expectations on educational decisions. In Goux
and Maurin (1997) analytical study of France, it was found out that neglecting the income
expectations of students will lead to the problem of overestimating the impact of social
background on school enrolment. Kodde (1985), integrated future income, forgone earnings,
overall unemployment and education- specific employment opportunities in a model of demand
for education. He tested the model on a sample of Dutch high school graduates, and found that
both monetary arguments and employment prospects influence the demand for education. This
submission is confirmed by Mingat and Tan (1996), who found that on the basis of aggregate
data, college enrolment rates are sensitive to unemployment level and economic conditions in the
nation in question. Related studies were also carried out by Wilson (2000), who focused on the
extent to which American youth’s high school graduates decision on enrolment respond to
economic incentives, in particular, expected income return. The result however suggests that
youths appear to be more likely to opt for graduating from high school when expected returns
from additional schooling increase.

III Nexus between HE and Human Capital Development

The highly educated, such as scientists and technicians, appear to have a comparative advantage
in understanding and adapting new or existing ideas into production processes. Human capital
development is a way to fulfil the potential of people by enlarging capabilities and this implies
empowerment of people, enabling them to participate actively in their own development (Salai-i-
Martin, 1961). Human capital development is also a means that enhances skills, knowledge,
productivity and inventiveness of people through a process of human capital formation. Thus
human capital development is a people centred strategy and not goods centred or production
centred strategy of development. It is basically the active participation of people in the
development process and the consequent need to construct institutions that permit and indeed
encourage that participation. There can be no significant economic growth in any country

7
without adequate human capital development. As knowledge becomes more important, countries
need to educate young people to a higher standard. The quality of knowledge generated within
higher education institutions, and its availability to the wider economy is becoming increasingly
critical to national competitiveness. This poses a serious challenge to the developing world.

Developing countries need HE to provide increasing number of students, especially those from
disadvantaged backgrounds. HE also produces a body of students with a general education that
encourages flexibility and innovation thus allowing the continual renewal of economic and social
structure relevant to a fast changing world. It teaches students not just what is currently known,
but also how to keep their knowledge up to date, so that they will be able to refresh their skills as
the economic environment changes. Furthermore, HE increases the amount and quality of
research, thus allowing the developing world to select, absorb and create new knowledge more
efficiently and rapidly than it currently does (World Bank, 2000). The provision of formal
education is seen as a productive investment in human capital which the proponents of the theory
have considered as equally or even more equally worthwhile than that of physical capital.

Babalola (2003) identified the rationality behind investment in human capital based on three
arguments, which implies that the new generation must be given appropriate parts of the
knowledge which has already been accumulated by previous generations; that the new
generations should be thought how existing knowledge should be used to develop new products
in order to introduce new processes, procedures and production methods. Finally, people must
be encouraged to develop entirely new ideas, products, processes and methods through creative
approaches. Fagerlind and Saha (1997) put it that efforts to promote investment in human capital
were seen to result in rapid economic growth of the society. Such investments were seen to
provide returns in the form of individual economic success and achievement.

The role of higher education in human capital development has been linked with globalization
residual effect, positive externalities/effect, innovativeness/ creativity. In a knowledge economy,
tertiary education can help economies keep up or catch up with more technologically advanced
societies. Higher education graduates are likely to be more aware of and in a better position to
use new technologies. They are also more likely to develop new tools and skills themselves.
Their knowledge can also improve their skills, while the greater confidence and know-how

8
inculcated by advanced schooling may generate entrepreneurship, with positive effects on job
creation. As regards residual effect, tertiary schooling also has indirect benefits for the
economies. By producing well trained teachers, it enhances the quality of primary and secondary
education systems and gives secondary graduates greater opportunities for economic
advancement. By training physicians and other health workers, it improves a society’s health,
raising productivity at work. Also, by nurturing governance and leadership skills, it can provide
countries with the talented individuals needed to establish a policy environment favourable to
growth. Setting up robust and fair legal and political institutions and making them a part of a
country’s fabric, and developing a culture of job and business creation, call for advanced
knowledge and decision making skills. Addressing environmental problems and improving
security against internal and external threats also place a premium on the skills that advanced
education is in the best placed to deliver.

Furthermore, HE generates spillover effect, as graduates are able to use their acquired knowledge
and skills to improve the skills and understanding of their non-graduate co-workers. The idea
that education generates positive externalities is by no means new. Many of the classical
economists argued strongly for government’s active support of education on the grounds of the
positive externalities that society would gain from a more educated labour force and populace
(Van-Den-Berg, 2001). Proponents of this view of education point out the close correlation
between new product development and levels of education. The countries that are at the forefront
of technology also have the most educated population (Van-Den-Berg, 2001).

Smith (1976) views the externalities to education as important to the proper functioning not only
of the economy but of a democratic society. Another way of modeling the role of education in
the growth and development process is to view human capital as a critical input for innovations,
research and development activities. From this perspective, education is seen as an intentional
effort to increase the resources needed for creating new ideas, and thus, any increase in education
will directly accelerate technological progress. This modeling approach usually adopts the
Schumpeterian assumptions of imperfectly competitive product markets and competitive
innovation, which permit the process of generating technological progress. Education is seen as

9
an input into the intentional and entrepreneurial efforts to create new technology and new
products.

The World Bank (2000) convened a Task Force on Higher Education and Society, which brought
together experts from thirteen countries to explore the future of tertiary education in developing
countries. The Task Force report, argued that higher education is essential to developing
countries if they are to prosper in a world economy where knowledge has become a vital area of
advantage. The quality of knowledge generated within higher education institutions and its
availability to the wider economy, the report stressed, are becoming increasingly critical to
national competitiveness.

Another World Bank report (2002) generated further momentum for higher education. This
report stressed the role of tertiary schooling in building technical and professional capacity and
bolstering primary and secondary education. Although, the report maintained the Bank’s
emphasis on primary and secondary schooling, it stated that higher education should receive not
more than 20 per cent of a country’s total education budget – it also argued that the state should
create enabling frameworks to encourage tertiary education institutions. The report further
suggested that countries should not focus only on rate of return analyses, but also take account of
the “major external benefits” of higher education.

IV Challenges facing Higher Education and Human Capital Development in Nigeria

Development of human capital in most developing countries in general and Nigeria in particular
is facing many challenges. Although, many of the African countries have increased their
educational spending in the last decade (2000 – 2010) but the emphasis was largely concentrated
on basic education at the expense of tertiary level. Tertiary education, a means of improving
economic growth and mitigating poverty, has been regrettably neglected. The Dakar Summit on
“Education for All” in 2000, for example, advocated only for primary education as a driver of
Social Welfare and relegated tertiary education to the background. The exclusion of higher
education from development initiatives lies in the shortage of empirical evidence that it affects
economic growth and poverty reduction (Tilak, 2003). Several economists including Milton
Friedman, Garry Becker and Jacob Mincer, developed the “human capital” theory to examine the

10
benefits of education for individuals and society. Recent evidence has suggested that Higher
Education is both a result and determinant of income and can produce public and private benefits
(Adedeji and Bamidele, 2003). However, because of long standing belief that primary and
secondary schooling are more important than tertiary education for economic development, the
international development community has encouraged African governments to give priority to
these levels of education, thus the relative neglect of HE. In fact, there has been a drastic decline
in the World Bank’s support for higher education sector, which has adversely affected the
progress of academic activities taking place in many HE institutions, especially in African
countries.

Moreover, enrollment rates in higher education in Sub-Saharan Africa are the lowest in the
world, a quick look at the PRSP2 reports provide an excellent evidence to support this assertion.
For instance, nine (9) out of the thirty-one Sub-Saharan African countries cited in the study
linked the problem of poor enrolment on inadequate infrastructural facilities in their universities
while others complained of cost of HE, weak student preparation for university education, poor
university management and overcrowding in hall of residence. In particular, it was reported that
the government of Malawi was confronted with inadequate boarding facilities, weak links to
industry that led to high graduate unemployment and inefficient use of resources by the
University of Malawi (PRSP). Also, in Mauritania, despite its low enrollment ratio, Mauritania
has problems ranging from overcrowding on campuses to high graduate unemployment in the
labour market, which is mainly because the HE curricula stressed theory rather than skill
competencies (PRSP). However, the case in Egypt is different, this is because all Egyptians who
graduated from institutions of HE are guaranteed jobs. The available information on PRSPs from
African countries like Cameroon, Malawi and Zambia showed that they gave due consideration
to HE and considered it as a way to reduce poverty. In relation to this, only Cameroon and
Ethiopia plan towards increasing tertiary education funding, while other Sub-Saharan countries

2
Poverty Reduction Strategy Paper (PRSP) Government of Mauritania, PRSP:34, Government of Mozambique,
PRSP:43-44, Government of Malawi, PRSP 49-50.

11
planned to reduce funding. Mozambique’s decision to emphasize post-secondary education led to
a National Commission and the creation of the Ministry of HE, Science and Technology. In the
millennium years, ten regional consultations were held with higher education institutions,
students, business, regional governments and civic associations. These consultations led to a
“Strategic Plan for HE in Mozambique 2000-2010”, which later developed into HE law.

In order to monitor its new emphasis on knowledge, the World Bank has created a Knowledge
Economy Index (KEI). This benchmarks countries’ performance on four aspects, comprising the
favorability for knowledge development within the economic and institutional regime, education,
innovation and information/communication technology. Most African countries languish near the
bottom of the KEI. South Africa, Botswana and Mauritius record scores near the middle but
Nigeria, Cameroon, Malawi, Tanzania and many others have not been able to score up to two of
the KEI (World Bank, 2002). In another development, the World Bank KEI expresses the fact
that Nigeria ranked 119 out of 146 countries in 2012 (World bank, 2012). This implies that
Nigeria has moved from 124 in ranking in 1995. In terms of considering Information and
Communication Technology (ICT), as a pillar of knowledge driven growth, Nigeria has made
appreciable development. She recorded 3.35 in 2012, which was an appreciable improvement
over the previous performance. Since the introduction of internet in Nigeria in 1995 (Mishra,
2009) and GSM in 2001 (Omeruo, 2007), the usage and subscription has been on the increase
(World Bank, 2012). In Ghana, there has been a five - year collaboration between the World
Bank and the government of Ghana, which formed a major component that aims to improve the
quality of HE in Ghana. This collaboration involves a Teaching and Learning Innovation Fund to
which academic units in Universities and Polytechnics can apply for funds, which can be used to
introduce new or different approaches to the provision of HE (Bloom, Canning and Chan, 2005).
In Uganda, the Makerere University has also improved its financial situation by encouraging
privately sponsored students. At least, 70% of students now pay commercial fees of the services
received. This has reduced dependency on state funds and helped to generate 30% of its running
costs. Enrollment doubled in the 1990s. In most modern nation-state’s constitutions, including
that of Nigeria, education, healthcare, and other components of human capital development are
rights of the citizens, which the government is obliged to provide for them.

12
However, some governments of nations show greater commitment to this noble task than others.
The most important aspects of investment in human capital development are education/training
and healthcare delivery. Education and training have become the most important investments
towards national growth and development. Nonetheless, studies have shown that Nigeria, since
her independence in 1960, has not been consistent towards the education and training of her
citizens. Until the 1960s, little attention was paid to nationally planned manpower development
in Nigeria, despite its importance in the overall national development. Ayara (2002) reported that
education has not had the expected positive growth impact on the economy of Nigeria. Hence, he
proposed three possibilities that could account for such results, which are:
i. Educational capital has gone into privately remunerative but socially unproductive
activities;
ii. There has been slow growth in the demand for educated labour;
iii. The education system has failed, such that schooling provides few (or no) skills.

The National policy on University Education in Nigeria set out some cardinal goals which
include
i. To provide self reliant high level manpower for national development;
ii. To develop Nigeria as a united nation with an enlightened ethical citizenry;
iii. To promote the cause of knowledge through research and scholarship
The pertinent question is to what extent has university education achieved these stated goals in
the country? The available evidence showed that Nigerian universities, in the last two decades
have witnessed unprecedented difficult policy and management issues arising from changes in
the domestic and global environment on one hand and weak institutional capacity to respond to
these challenges on the other. No wonder reports on Higher education specifically confirmed that
Nigeria’s educational system is experiencing a serious decline in terms of quality of its research
due to lack of adequate funding. Since the economic downturn in the eighties, the Nigerian
education sector has suffered unprecedented setbacks in the level of resource available to the
system.

It is also clear from the available data that the federal government only allocated an average of
0.5% of total GDP to education within the period of 1981 and 1989. Also between 1990 and
1998 the average share of total GDP to education was 3.9%, while it recorded an average of

13
16.8% between 1999 and 2007, which rose to 20% in 2008 (CBN, 2008). This is an indication
that between 1999 and 2008 the Nigerian government recorded some improvements in its
spending on the education, although this reflected a nominal increase in the sector. Moreover, the
0.5% of GDP allocated to the education sector in Nigeria, was too low compared to the average
of about 4.5% of GDP allocated to the education sector in other Sub-Saharan African countries
and lower to an average of 6% of GDP allocated to the education sector in Organization for
Economic Co-operation and Development (OECD) countries (Alabi and Chime, 2008).

However, considering the share of education expenditure from oil revenue between 1981 and
1989, it was an average of 9.3%. The years 1990 to 1998 witnessed an average share value of
4.0% which later declined to an average of 3.7% between 1999 and 2007. In 2008, there was a
gross decline of the share to 0.3% due to the global financial crisis which was reflected in decline
in the demand for oil and fall in the price and obvious revenue from oil. The share of expenditure
on education as percentage of total government expenditure also showed a trend of an average
share of 6.5%, 5.6%, 7.1% and 5.3% between the identified periods of 1981-1989, 1990-1998,
1999 -2007 and 2008 respectively (CBN, 2008). From these data, it is clear that no proportionate
share of government finance has been directed to education, and hence human capital
development in Nigeria has suffered. The trends of budgetary allocation of the federal
government to the education sector compared to the benchmark of 26% recommended by
UNESCO, showed that the sector has been going through an internal financial crisis under
different regimes of governments even before the global financial crisis of 2008.

By the 1980s, the problem of students’ inability to gain access into university education in
Nigeria was becoming a serious concern to stakeholders at large. This identified problem
manifested itself in the introduction of quota system by the Joint Admissions and Matriculations
Board (JAMB). Consequently, about 13% of the total qualified applicants were admitted into the
public universities (NUC, 2005). Given this critical situation, the plight of the remaining students
denied admissions (about 87% of these applicants) has become a nightmare.

This problem posed serious implications on the social and economic development of the nation.
The nation is presently in serious danger of producing miscreants, the unlearned, wronged,
angry, agitated and even the hopeless among the youths. The multiplier effect of this on the
economy is decline in economic wellbeing and the building of human capacity of individuals and

14
the society at large.

Based on this, between May1999 to date, the federal government of Nigeria approved the
establishment of private universities. These universities are to bridge the existing supply-
demand gap (NUC, 2005). Presently, there are 116 universities in Nigeria, comprising thirty- six
(36) federally owned, thirty-five (35) state and forty-five (45) privately owned universities (NUC
2011). Despite this number, available data still confirmed that there is limited access to
university education in Nigeria3.

During the Obasanjo’s administration, a 4-year medium term plan document was introduced,
christened the National Economic Direction. The plan had the primary objective of pursuing a
strong virile, broad-based economy with adequate capacity to absorb externally generated
shocks. However, the plan did not achieve much of the articulated programmes of which
education was inclusive. Therefore the late president Umaru Musa Yar’ Adua in 2007 presented
a Seven-Point Agenda, which conceptualized and comprehensively articulated the
implementation strategies of ensuring the realization of Vision 20:2020. The agenda, inter alia,
focused on striking education issues. The two-fold reforms in the educational sector are to ensure
the minimum acceptable international standards of education for all. This reform was to be
achieved through massive injection of funds into the education sector. It is however evident with
the present trend in funding, that Nigeria is not working towards the realization of this objective.

Abidogun (2008) has also hinted that low Federal government budgetary allocation to education
may hamper accessibility to education at all levels in Nigeria. He opined that poor budgetary
allocation to education by government will hinder access to education at any level, especially by
children from poor homes. This, according to Hinchcliffe, (2002) was one of the reasons for the
low enrolment at all levels of education in Nigeria.

The World Bank in 1994 reported that compared with many other countries, such as Ghana,
Cameroon, Kenya, Zimbabwe, Philippines, Thailand and Mexico, Nigeria spent less of its total
budget on education. This has seriously constrained access to education at all levels of education.

In an elaborate study conducted by Campbell (2008) on the nexus between student’s enrolment

3
http://www.ihen.org.ng/issues-in-he/financing-he

15
and resources in private universities in Nigeria, it was found that parents’ monthly income is one
of the determinants of demand for enrolment in private universities in Nigeria. This study found
that about 45% of the parents’ of the respondents sampled from six private universities in the six
geo-political zones of the country were within the monthly income range of N150,000 –
N250,000, while only 31% earn above N250,000. The remaining 24% were below these
specified income levels. It was also interesting to find that the occupational structure of these
parents revealed that the bulk of the parents (42%) were civil servants, with only 37% in the
business sector, while the remaining constituted core professionals. Further, 57% of these
parents have at most one child enrolled in the private university. The study also indicated that a
positive but non-significant relationship existed between parents’ monthly income and the
number of children enrolled in the private university (r = 0.007<0.9969). This showed that there
were other factors, apart from parents’ monthly income, which accounted for the number of
children a family enrolls in private universities. This finding corroborates the submission of
Heller (1997) and Becker (1967) who presented the price elasticity of demand for education in
which other factors such as price of education, price of other goods and some socio-economic
variables were found as determinants of demand for education at any level.

Considering the problem of funding and access as well as the relevance of HE programmes in the
labour market, it is necessary to ask if the country will be able to meet its human capital needs
and development in the face of the mounting challenges facing Nigerian universities. This should
be a serious issue, which Nigerian government must tackle in order to ensure capacity building
and knowledge creation.

V Conclusion and Recommendations

From the forgoing, it is clear that higher education indeed plays an important and prominent role
in capacity building and knowledge creation of any nation. However for this role to be
effectively played there is need to increase and widen access to higher education, proffer
solutions to the problem of under-funding within the system and tackle the multifaceted crisis
created by the mismatch between graduate output and labour market demand. Without this,
higher education will be grossly hindered from performing its role in the human capital
development. Since the Nigerian economy relies on earnings from foreign exchange, there is
need to benchmark spending on HE to ensure the financial stability of the system. Nigeria can

16
move towards adopting the UNESCO recommendation on this. Also, the problem created by
overdependence on oil earnings should be tackled through diversification of the economy. This
will reduce the vagaries of external shocks on government spending and on education
expenditure in particular. The time is fully ripe to diversify Nigerian economic base in order to
move away from mono to a wider fiscal space that can promote accelerated economic growth
and development.

As a corollary, the federal government should encourage public-private partnerships (PPP) at all
levels of education in the country. This will go a long way to reduce the burden of government
budgets on the education sector. The processes and procedures for the establishment of private
universities should be made much easier and investors’ friendly by the National Universities
Commission (NUC). This will go a long way to improve the performance of the educational
system in general and the payoff from higher education investment in particular. Finally, there is
need for HE policy, which will respond to the long-festering problems of access, quality,
financing, management and address the graduate and labour market mismatch within the nation’s
university system, and seek to bring this system more in line with global good practices.

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