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ABSTRACT

The study’s goal is to examine the impact of government education spending on Nigeria’s economic growth critically. The dependent variable was employed as a proxy for economic growth, and the explanatory variables were recurrent government expenditure on education (RGEE), capital government expenditure on education (CGEE), gross fixed capital formation (GFCF), total employment (TEMP), and total employment (TEMP) (proxy by employee compensation). The analysis used annual time series data from the CBN Statistical Bulletin from 1981 to 2012. (2011 and 2013). The Augmented Dickey- Fuller test was used to test for the stationarity of the variables, and an error correcting mechanism was used to test for the long run association between the variables, which was shown to be negative between RGDP and RGEE, CGEE, and GFCF, but positive between RGDP and TEMP. However, based on these findings, the study recommends, among other things, that a mechanism be established to monitor funds allocated to the education sector, in order to comply with the theoretical and empirical evidence that public education expenditure plays a critical role in achieving rapid and sustained economic growth.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

According to a review of Nigeria’s budgetary operations and trends, the federal government’s education spending is classified as part of the social and community services sector. According to Orubu (1989), this implies that education is a valuable commodity.

Education is critical for the development of human capital. It increases individual productivity, resulting in trained labor capable of steering the country’s economy down a path of long-term growth. (2008, Zaman) The importance of education in understanding, controlling, altering, and redesigning human behavior cannot be overstated in the Nigerian context. However, as noted by the CBN (2002), the importance of education is reminiscent in its role as a means of understanding, controlling, altering, and redesigning human behavior.

As a result, an educated people will avoid hazardous practices and habits, allowing them to live healthier lives and become more productive, ultimately resulting to improved economic outputs. Ola (1998; 14), who formerly stated that education had a link with economic development, says that “if you see an economy doing well, find out what is spent on education.”

Psacharopoulos (1973), Combs (1983), and Aboribo (1999) have all shown that education is a function of national income and per capita income, and that inequalities between countries are better explained by differences in human capital endowments rather than physical capital. This, however, illustrates the logic for allocating 25–35 percent of annual revenue.

The educational sector has seen a lot of upheaval in the previous year since the government has failed to establish the necessary policies to ensure a steady growth trajectory. Underfunding, infrastructural degradation, inadequate discipline, and a low level of learning attainment defined it. This and other difficulties prompted the Academic Staff Union of Universities (ASUU) to go on strike for six months, further damaging the already ailing educational system and lowering its international standing. (Ayo,2014). Although discussions have been made about the impact of the six-month strike on economic activity, the social vices that resulted and the slow rate of economic activity were not forgotten. According to Gisanabagbo, education spending is viewed as an investment, and hence the requirement to measure its returns to scale is critical (2006). Education is valued for both its immediate and long-term advantages, so assessing the impact of education spending on economic growth should take into account the economy’s consumption and investment gains. According to studies, the decision between various physical infrastructure expenditures is based on society’s objectives, which are represented by government decisions, and a study of the cost of the investment vs the future benefits that will come from that investment. (2006) (Gisanabagbo). The consequence is that educational spending versus educational investment tends to impact future income distribution patterns, hence equity is important. According to Anyanwu, Oyefusi, Oaikhena, and Dimowo (1997), human resources are the ultimate foundation for a nation’s riches. Because human resources have such a large influence in economic progress, economists generally agree with this assumption. Globalization and growing economic integration, on the other hand, have de-emphasized the sole mechanical use of physical resources in favor of knowledge-based economic activities, implying that available human resources must be educated in order to adapt to new and advanced modes of production. However, there are compelling grounds to believe that human capital, which is the result of educated human resources, will be more productive overall. This, however, is the basis for Lawal, Abiodun, Wahab, and Iyoha’s (2011) claim that skilled workers are in short supply. The debate over the impact of government education spending on economic growth has sparked debate since the dawn of time. Prior to World War II, the link between government education spending and economic growth was largely insignificant, as economists were more concerned with structural issues such as labor migration from traditional to modern industries. Education, on the other hand, can be used to support this claim by looking at its potential to generate the capacity for self-sustaining growth and development, which is at the heart of modern enterprises.

STATEMENT OF THE PROBLEM

Nigeria could be considered as a country with the possibility to establish a rich economy, thanks to its massive population, which serves as a human resource advantage, as well as its vast natural resources and relative high oil wealth. This was demonstrated in 2014, when it was listed as Africa’s number one economy, with a G.D.P. of USD 568.89 billion.

Despite all of this economic progress, the country remains impoverished; this, however, is a paradox. Due to an inexperienced work base, attempts to transition from an oil economy to one that focuses on other sectors have failed. Investment is a smart strategy to solve this problem in order to promote economic growth and diversity.

Nigeria has made a commitment to education over the years, believing that eliminating illiteracy will lead to faster national growth. Despite the overwhelming evidence that education is critical to the growth of a community and a nation, there is a significant disparity in educational access, quality, and equity (Ayo, 2014).

In recent years, empirical evidence has shown that the Nigerian educational system has consistently produced graduates who have failed to adapt to changing production techniques over time; this is due to a lack of adequate infrastructure in the system, underfunding, poor learning achievement due to outdated curriculum, and a low rate of research and development. Human capital is crucial for attaining long-term economic growth, but the biggest contribution is made through investments in the quality and quantity of education (Gisanabagbo, 2006). In the current era of globalization, economic growth and development will be striated in low-income countries. This study adds to the body of research by using current Nigerian data to investigate the likely impact of education investment on a country’s performance in terms of growth and development. Unless they commit significant budgetary allocations to higher education and specify economic policies that promote the effective use of talents in society, they will fail. The study tends to provide resource responses to the following research questions based on the aforesaid.

RESEARCH QUESTIONS

i. To what extent does the government’s investment in education have an impact on Nigeria’s economic growth?

ii. How does the government’s recurring expenditure on education effect Nigeria’s economic growth?

iii. Is there a connection between school attendance and economic growth in Nigeria?

iv. Is there a connection between capital formation and economic growth in Nigeria?

OBJECTIVE OF THE STUDY

The goal of this study is to provide answers to the above-mentioned research issues. Specific and general aims are grouped into the goals.

The following are the precise goals:

i. To determine the influence of government education capital expenditures on economic growth.

ii. To investigate the influence of government recurrent education spending on economic growth.

iii. To learn more about the impact of primary, secondary, and university education on Nigeria’s economic growth.

iv. To investigate the impact of human capital formation on Nigerian economic growth.

The following are the study’s broad objectives:

To determine whether or not government education spending is effective. To make recommendations for the government’s investing methodologies. To determine the impact of government spending on education on job creation in Nigeria.

RESEARCH HYPOTHESIS

Ho: There is no significant link between government education capital spending and economic growth.

H1: Government capital spending on education and economic growth have a considerable relationship.

Ho: There is no evidence of a link between government recurrent education spending and economic growth.

H1: Government recurrent expenditure on education and economic growth have a considerable relationship.

Ho: There is no link between enrolment in primary, secondary, or higher schools and economic growth.

H1: Enrollment in schools and economic growth have a favorable link.

Ho: In Nigeria, there is no significant link between human capital formation and economic growth.

H1: In Nigeria, there is a strong link between human capital formation and economic growth.

SIGNIFICANCE OF THE STUDY

Nigeria is the world’s most populous black nation, with enormous human resources and natural assets, but its large population is marked by mass illiteracy, poverty, a low standard of living, and low productivity, among other things. The Vision 20-2020 was launched under the Obasanjo administration (1999-2003) to propel the economy into the top 20 most developed economies by 2020. It is a long-term dream, with one of its goals being the creation of a knowledge-based economy with appropriate people resources. Because a contemporary economy requires highly skilled individuals to function properly, achieving this goal necessitates a high level of human capital (Lawal et al, 2011). This research could be valuable in policymaking by demonstrating that Nigeria’s economy can be improved through investing.

 SCOPE OF THE STUDY

This research focuses on Nigeria’s educational system as well as the Nigerian populace. It makes use of data from Nigeria’s primary, secondary, and higher institutions. Its primary data sources included books, journals, theses, academic publications, newspaper captions, and the internet. The methodology used in this work to assess the long term was the error correction model.

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