1.1 BACKGROUND OF THE STUDY
Education is an age long phenomenon in all societies though it may take various forms. Education directly affects economic growth so far it is essential to enhance human capital. An economy’s production capacity depends on various factors. These include physical capital, technology, number of workers, as well as their quality. This quality is basically determined by what is called human capital (the stock of information, skills and habits). An increase in workers’ educational level improves their human capital, increasing the productivity of those workers and the economy’s output. Education whether formal or informal, contributes to skill acquisition. 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 boost the marginal product of the other co-operant factors. Beside the contribution of education on national economic growth, it also plays significant role in reducing income inequality, research done by Phillipe, Peter and Fabrice, (2011) and Kakar, Khilji and Khan (2011) concluded that educational achievement as well as human capital development would positively reduce income inequality. In general, there is a consensus among the researchers that education influenced economic growth by reducing poverty incidence, social imbalances as well as income equality. Moreover, it gives a positive impact to the poor and needy to improve their live. Enyi (1999) noted that investment in education rests on the logic that the educated earns more than the uneducated in most countries, and that the earning power of individual reflects their productivity level, which in turns is promoted by education. Also, economic growth is related to individual’s productivity level which means that more education leads to more economic growth. Within a given occupation, a better educated person is likely to do a job better than a less educated one because additional education is expected to make an individual more aware of better ways of doing things (Ogbonnaya, 2006). According to Dauda (2009), the crucial role education plays in the overall development of a nation cannot be overemphasized because education is not only seen as a key to poverty reduction and vehicle for promoting equity, fairness and social justice but also helps to supply the essential human capital which is a necessary condition for sustained economic growth. Therefore, enhancing effective investment on education has been a tenet of growth and development strategies of most countries. Blaug (2012) pointed out that the relationship between education and economy lies on the effect of literacy on the development of the economy. Education contributes to economic growth by improving the literacy level of the labour force and by helping in the acquisition of relevant skills and expertise. Eze (1983) submitted that the contribution of labour to economic growth varies positively with the length of period spent in schools. This long stay in school helps the individual in the acquisition and mastery of skills, which are required for effective production of goods and services. The acquisition of skills and expertise accelerates economic growth through higher job productivity and efficiency occasioned by a better mastery of the tools and techniques required for job performance. Countries with better skilled labour force develop faster and better than those with less skills especially if such countries posses the relevant management skills that will ensure that both human and physical resources are well blended and reconciled through effective planning, organizing, controlling, evaluating, and coordinating to desired results (Ogbonnaya, 2006). Education contributes to national development by fostering literacy; developing programmes to achieve national objectives; eliminating wasteful imbalances in the educational system; checking unemployment in the economy and judicious utilization of available resources. But Ogbonnaya (2006), see national development as the growth, changes and improvements occurring in a given economy with the aim of promoting the quality of life among the populace, poverty reduction inclusive. In essence, as the educational system in a country develops, the economy will continue to growth and poverty reduction will be accelerated. A number of studies have been conducted to establish the relationship between education and economy. For instance, Anderson (2013) found evidence from his study to conclude that any country striving to increase its gross domestic product must first try to raise its literacy level. Similarly, Kaser (1966) discovered in his study that higher Gross National Income (GNI) per head is associated with higher enrolment ratio particularly at the secondary and tertiary levels of education. Bennett (2015) found evidence from his study to establish that vocational and general secondary education has high relationship with economic growth. Similarly, Peaslee (2015) showed that no country has ever achieved significant economic growth without first enrolling 10 per cent of the total population in primary schools. The overall implication of these reported studies is that the development of education system would very likely lead to rapid economic growth. However, despite the giant strides witnessed in the education sector in Nigeria in the last two decades which has resulted in the increased literacy rate and human capital development, economic growth has not been inclusive and poverty rate has been on the increase. This negates the assumption that the more the educational sector is developed, the more the economy grows and the more poverty is reduced. The Nigeria’s situation seems pathetic because efforts by the three tiers of government at developing education have not been translated to increased gross domestic product and reduction in poverty. Vast majority of Nigerians live below one dollar per day with high rate of infant and maternal mortality, unemployment, income inequality and insecurity. To this end, effective investment in human capital through the provision of quality education is a key component of economic growth and improved productivity in developing countries like Nigeria. However, the human capital development indices in Nigeria do not reflect a substantial expenditure on education. For instance, the national budget revealed the small percent of fund budgeted for education in Nigeria, this is while Sanusi (2003) opined that the effect of low investment in education on the competitiveness of Nigerian labour force in the production of goods and services, bearing in mind the fact that low level of skills and knowledge will certainly reduce the quantity and quality of individual output. Therefore, there is need to examine the impact of education on economic growth in Nigeria.
1.2 STATEMENT OF 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 enrolment 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.
1.3 AIMS OF THE STUDY
The major purpose of this study is to examine the trend and impact of education on economic growth. Other general objectives of the study are:
1. To examine the trend of educational expenditure in Nigeria from 1980 to 2008.
2. To examine the role of education in economic growth of Nigeria
3. To examine the economic growth of Nigeria in relation to education levels in Nigeria during 1980 to 2008.
4. To examine the impact of education on economic growth in Nigeria.
5. To examine the relationship between education and economic growth in Nigeria.
6. To examine policy options for Nigeria on how to utilize education as a vehicle for economic growth.
1.4 RESEARCH QUESTIONS
1. How is the trend of educational expenditure in Nigeria from 1980 to 2008?
2. What is the role of education in economic growth of Nigeria?
3. How is the economic growth of Nigeria in relation to education levels in Nigeria during 1980 to 2008?
4. What is the impact of education on economic growth in Nigeria?
5. What is the relationship between education and economic growth in Nigeria?
6. What are the policy options for Nigeria on how to utilize education as a vehicle for economic growth?
1.5 RESEARCH HYPOTHESES
H0: There is no significant impact of education on economic growth in Nigeria
H1: There is a significant impact of education on economic growth in Nigeria
H0: There is no significant relationship between education and economic growth in Nigeria.
H1: There is a significant relationship between education and economic growth in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
Nigeria is the most populous black nation in the world, with abundant human resources and natural endowments, however this evident large numbers of people are characterized by mass illiteracy poverty, low standard of living, low productivity, etc. The Obasanjo regime (1999-2003), the vision 20-2020 was adopted to off shoot the economy into the top 20 most developed economies in the year 2020. It is a long term dream in which one of its objectives is to create a knowledge based economy with the adequate human resources development. Achieving this goal requires high level human capital because to function well a modern economy requires highly trained workers (Lawal et al, 2011). This study may be useful in policy orientation by demonstrating that Nigeria economic by investing in education.
This study tends to provide information that will be relevant to ministries, departments and agencies of education, on the importance of both public and private investment in the education sector in terms of providing quality education for its citizenry. It is also relevant to the government and its parastatals in terms of the improvement of allocation of resources to the education sector; Emphasis here should be on the most efficient ways to invest in the sector in order to achieve the intended goals and objectives of such expenditure. This research will also be relevant to researchers as a source of material for further research in the body of knowledge.
1.7SCOPE OF THE STUDY
The study is based on the trend and impacts of education on economic growth (1980-2008).
1.8 LIMITATION OF STUDY
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 (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9 DEFINITION OF TERMS
Primary Education: Primary education is typically the first stage of compulsory education, coming between early childhood education and secondary education.
Secondary Education: Typically takes place after six years of primary education and is followed by higher education, vocational training or employment.
Tertiary Education: Tertiary education also referred to as third stage, third level, and postsecondary education, is the educational level following the completion of a school providing a secondary education. The World Bank, for example, defines tertiary education as including universities as well as institutions that teach specific capacities of higher learning such as colleges, technical training institutes, community colleges, nursing schools, research laboratories, centres of excellence, and distance learning centres.
Technical and Vocational Education and Training (TVET): Vocational education is education that prepares people to work in a trade, a craft, as a technician, or in professional vocations. Craft vocations are usually based on manual or practical activities and are traditionally non-academic but related to a specific trade or occupation.
Economic Growth: Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
Education Spending: General government expenditure on education (current, capital, and transfers). It includes expenditure funded by transfers from international sources to government. General government usually refers to local, regional and central governments.
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