____How the ghosts of Nigeria’s dead agencies and institutions are coming back to hunt the economy.
This is part I of a four series write-up addressing each institution or agencies as an engine of economic sustainability.
There is no free lunch in economics, if you plan and invest today you will reap in the nearest future, but if you fail to plan or invest today, you will suffer the consequences in the future.
There are 25 rich countries in the world and they all have something in common…..they invest in building strong institutions, and countries from the developing world that has followed this economic model are on a sustainable growth path……..No nation has ever survived or retained Economic growth with dead agencies and institutions, they are what help sustain organic or generic growth in an economy and help reduce or stop capital flight, in short they are the backbone of any economy…..this is why President Buhari must resuscitate these agencies and institutions if the economy must grow, survive, remain sustainable, and reach its potential.
Common sense will tell anyone that Nigeria had a striving economy and a strong currency in the 70’s and early 80’s when the country had strong working agencies and institutions which included:
- Good and well-funded educational system.
- A well-funded and managed healthcare sector.
- Security (Police)…. Stability and protects both local and international tourism.
- Transportation…….A Striving Aviation Sector (Nigerian Airways), Nigerian National Shipping lines, and the Nigerian Railways.
- A working petroleum refinery sector, and a growing manufacturing sector.
As corruption destroyed these agencies and institutions, people sort for their services outside the country resulting in capital flight and putting a strain on the country’s dollar reserve.
I wrote an article in June 2016, and titled it “Nigeria, the Illusion that was Called a Growing Economy” highlighting how the economy was not sustainable because we neither have the factors that grows an economy in an organic or generic manner and the agencies and institutions that helps sustain such growth, comparing it to that of South Africa and some other world economy and why South Africa may overtake that of Nigeria again. By mid-August 2016, that forecast had come true……why?……it was very easy to forecast.
First, Nigeria has no other major source of foreign earning exchange except from the oil and gas sector, second, as oil prices fell creating a deficit in trade balance and shortfall in the dollar reserve, government will continue to tighten the nozzle on importation by reducing the dollars available for import and that will cause increase in demand resulting in increase in the value of the dollar against the Naira. Third, the agencies and institutions that would have helped retain dollars within the economy and stop capital flight are all dead hence as people seek for their services offshore it causes massive outflow of dollars and increasing demand.
While there is so much emphasis on the petroleum refining and manufacturing sectors, emphasis are not given to Education, Healthcare, Aviation, and Marine……these sectors are actually the most volatile, if these sectors do not exist or cannot provide satisfactory services, the citizens are bound to look for them elsewhere, and as they go beyond the shores of the country to seek them, they result in capital flight putting a strain on the Dollar and ultimately increasing its value against the Naira..
The dead or non-existence of these agencies is actually a double jeopardy for the economy…..even if these agencies were working, the simple principle in economics is that when people get richer import tends to increase, that is because they are able to afford more luxury and foreign products increasing the number of container vessels coming into the country, afford to send kids abroad to school, go for medical check-ups abroad, travel more for holidays abroad…..so you can imagine what will happen in a growing or expanding economy when the country provide substandard or cannot even provide these services.
An Unstable Currency and a Fluctuating GDP…..
Nigeria may continue to have the biggest economy for a while in Africa in term of nominal GDP, but calculating inflation and currency depreciation and converting to dollars which gives the Real GDP, South Africa will continue to have the edge….this is because they have less inflation and currency is very stable compared to the Naira…..these agencies and institutions are what help sustain their economy.
This was the reason why at the end of 2015 Nigeria’s GDP was USD$481 billion and by Mid-August 2015, eight months later the GDP had dropped to USD$296 billion a whopping USD$185 billion. There is too much pressure on the dollar and it is causing inflation and depreciation.
President Buhari and the Fight against Corruption……..
What kills institutions?…..it is corruption, the obvious truth is we will only be deceiving ourselves if we think we can grow healthy institutions with corruption rampaging the country. Buhari knows this too well and that why he said “if we don’t kill corruption, corruption will eventually kill us”…corruption is the largest obstacle to economic growth and sustainability, the president knows this too well and that is why he has thrown all weight behind the fight.
It has robbed us of healthy agencies and institutions mentioned above and the economy suffers the consequences today, with these agencies and institutions dead, resuscitating them with funds that will eventually be stolen will only bring us back to square one.
Agencies and Institutions that Help Sustain Economic Growth………………
“Good and working institutions are the lifeblood of any economy”
Without reviving and investing in these agencies and institutions, the economy will continue to be subjected to capital flight, the unfavourable crude oil prices has exposed the huge demand on forex these institutions continue to impose on the economy, without these agencies and institutions being able to generate a trade surplus or balance for country the economy will continue to collapse during bursts due to trade deficits, they have become the loopholes and drain pipes in the Nigerian Economy.
- Education!…………Nigeria’s Underfunded Educational System.
Education is a Massive Source of Foreign Earnings for other Countries and a Drain for Nigeria.
Note: Nigeria has the highest number of students per capita studying outside the country in the world.
In the 70’s and 80’s, students from other parts of African came to Nigeria to school, but today the reverse is the case, another factor is the growing population and the government’s inability to use data and statistics to plan. If you want to know how the government has failed over the years in expanding the schools to accommodate the growing population, just go back to the public primary school you attended and see if a block or an additional primary school has been added in that area since you left, then find out what the population of that area was over 40 years ago you attended the school.
Every year about 1.5 million secondary school leavers sit for exams to gain admission into either private or public universities in Nigeria but only 600,000 are granted admission, so what happens to the other 900,000 students?..….this is a humongous figure to be overlooked by the government, in fact it is disaster for the economy. What we have failed to understand is that our negligence has become a massive gain for other countries and a massive drain on our foreign reserve and it is exerting massive pressure on the economy.
In 2014, the Guardian UK released the UNESCO rating for top 20 countries that attract international students, The United States was top on the list with 740,482 students, followed by the UK with 427,686, and France with 271,399. Two African countries made the list, South Africa 11th with 70,428 students and Egypt 19th with 49,011 students. The interesting thing however is how much these international students inject into these economies, the US Department of Commerce announced in 2015 that International students contributed more than USD$30.5 billion to the US economy, that is an average of USD$42,000 per student annually from school fees and consumer spending. International students contributed GBP14 billion to the UK economy in 2015, and expected to reach GBP26 billion by 2025, AUS$19 to the Australian economy, and USD$8 billion to the Canadian economy.
This is not surprising considering how much these countries invest in education and invariably setting a standard that attracts foreign students and limiting mass exodus of students from their countries, the U.S annually invests an average of about 15% of total Government Expenditure on education, that is about USD$595 billion of its USD$3.95 trillion budget for 2016, and spends an average of about 5.2% of its GDP on Education, that is about USD$940 billion of its USD$18 trillion economy. The UK invests an average of about 13.2% of total Government Expenditure on education, about GBP102 billion of GBP772 billion annually, and about 5.5% of its GDP on education, that is USD$156.7 billion of its USD$2.85 billion economy.
If we choose not to compare Nigeria to the Mighty United States and Great Britain, one thing is certain from the top 20 countries that attracts foreign students, they all invest massively in education. Coming home to Africa, the South African government has demonstrated the same model of investment in their economy, government’s total expenditure for 2016 is R1.46 trillion (USD$106 billion), and 20% is to be invested in education, that is USD$21.2 billion, and has always averaged between 19% to 20% annually. The Egyptian Government Expenditure on Education in 2014 was EGP105.3 billion (USD$12 billion) from an EGP790 billion (USD$90 billion) budget, representing 13.3% of the budget.
Nigeria’s investment in the educational sector is pathetic, looking at the 2016 budget and all subsequent budget over the years, it clearly shows government neglect of the sector which has led to the decadence the sector faces today. From the N6.07 trillion 2016 budget, education got N369.6 billion representing 6% of the budget, the interesting part is the N369.6 billion only has a value of USD$1.16 billion, even if we use the old exchange rate of N155 we are only going to get a little above USD$2 billion.
The disturbing part is this, Nigeria with a population of 180 million people has an estimated population of 62.3% between the age brackets of zero to 24 years, which is 112 million people, this is the educative age from kindergarten to being a first degree graduate, yet the country only invests USD$1.16 billion on its future leaders. South Africa with a population of 54.9million (about 30% of Nigeria’s population) has 46.4% between the age brackets of zero to 24 years, representing 25.4 million of the population and the government invests USD$21.2 billion on education. Egypt with a population of 94.6 million people (about 50% of Nigeria’s Population) with 52.5% of the population falling between the bracket zero to 24 years and representing 49.6 million of the entire population spends USD$12 billion on their educational sector.
While the United States Government spends an average of about USD$10,000 per student annually, the UK government spends SD$9,500, the South African Government spends USD$1,200, the Egyptian Government spends USD$280, the Nigerian government spends an average of between USD$10 (Ten) to USD$15 (Fifteen) annually per student.
WE CAN ALL SEE WHERE THE PROBLEM LIES……….government’s failure to invest in education over the years created a steady decline in both expansion, infrastructure, and services. The graph shows government’s neglect in education expenditure declining from 1981 to 2006 before it started picking up again……….25 years of neglect in funding coupled with a period of massive population explosion resulting in decayed infrastructure and services, the graph only goes to explain the trend that characterized Nigerians schooling abroad.
From 1985 to 2005, the Nigerian government spent USD$1 billion and below on education…..during the 70’s and early 80’s Nigerians schooled at home and those who travelled went for either a Master’s Degree or a PhD, only very few from either very wealthy homes or on government scholarship did their BSc abroad. But in the late 80’s when the schools started feeling the impact of the neglect, standards started falling, students started leaving for BSc abroad, and by early 2000…….secondary school students also followed.
The truth is diversifying the economy through manufacturing or agriculture is not the solution…..this is because as the economy improves and people get richer and can afford these services beyond the shores of Nigeria, the mass exodus will increase and will continue to put a strain on the economy. Example was the diversification of the economy in the early 2000 which created a larger middle class and increased Nigerian students in foreign schools by 71% between 2007 and 2010.
Population Explosion and a Decreasing Education Budget……………
In 1981 Nigeria had a population of 76 million people and a GDP of USD61.1 billion of which about 45 million fell between the educational age brackets of zero to 24 years and government expenditure on education was USD$3 billion representing 4.9% of GDP, from 1982 the budget on education started its decline, and by 1986 it had fallen below USD$1 billion annually up until 2006 before it was increased to USD$1.196 billion……by this same period the Nigerian population had increased to 143 million and about 89 million people were now between age brackets of zero to 24 years.
By 2010, with a population of 159 million people and about 98.6 million between age brackets zero to 24 years, a GDP of USD$369 billion, the education budget was USD$3 billion the same it was 29 years ago in 1981 but this time around representing 0.81% of GDP…….less than 1%, …..a whopping 109.2% increase in population but zero increase in education budget. The irony is that by 2016 with a population of 180 million people and 112 million between age brackets of zero to 24 years the education budget has declined to USD$1.16 billion….136.8% increase in population from 1981 and a -61.3% decrease in education budget….while population is increasing, expenditure on education is decreasing at an alarming rate.
But looking at a country like South Africa, it is the direct opposite…….in 1981 South Africa’s population stood at 28.3 million with a population bracket of zero to 24 years being 13.1 million, education budget was USD$4.2 billion. But as population increased so did education budget…..by 2016, the population had increased to 54.9 million……94% increase in population and education budget had also reached USD$21.2 billion…..405% over a period of 35 years. Egypt not surprisingly has also demonstrated the same trend.
The Capital Flight…………
Recently the Central Bank Governor, Mr. Godwin Emefiele stated that Nigerian’s appetite for foreign education was also a major factor causing the recession and that Nigerians spend about USD$2 billion annually on foreign education. While the cause is true, Mr. Emefiele must critically examine his figures, more than 50% of those who pay school fees abroad source for their forex from the black market, secondly, the Central Bank does not sell upkeep or allowances to students and such funds are sourced for from the black market.
Emefiele’s claim can also be challenged by recent publication from University World News, which claimed that a source at the Central Bank had told the news agency that the apex financial institution processes about two million foreign exchange applications annually for students abroad – at all education levels.
As at 2010, Sanusi Lamido Sanusi said Nigeria had 71,000 students in Ghana costing the economy USD$1 billion annually, and in 2010, Nigerians spent USD$1.56 billion in the UK education sector. Exam and ethics International reported that Nigerians spent USD$10 billion in 2012 on education outside the country. Nigeria has about 18,000 students in the UK, about 8,000 students in the US, 9,000 students in Canada, 9,000 students in Malaysia, 5,000 students in Ukraine, and about 2,000 students in South Africa, Russia, Sweden, Germany, Norway, Republic of Benin, India, Saudi Arabia, Australia, just to mention a few.
The Foreign Strategy and our daylight Ignorance…………….
In Feb. 2015, ICEF Monitor reported that the British Council had projected that Nigeria will lead the world in tertiary-age population growth through 2024, the council projected that population age between 18-to-24 years will grow from 16.1 million in 2013 to 22.5 million in 2024 representing an annual growth of 3.1% surpassing that of China (-2.9%) and India (0.3%). We now see why data and up to date statistics helps make critical decisions and why recruitment agencies for foreign schools have flooded the country over the years.
The second thing is our ignorance born out of lack of critical reasoning…….the British, Americans and other foreign countries come to Nigeria and establish their schools which run their curriculums and calendars for both primary and secondary schools, where do we think these kids are going to end up after their secondary school education?……..kids that have been trained in either the American or British system of education will obviously end up in their system for tertiary education. The schools are just strategies for future economic gains.
What has now become prevalent with these schools is the fact that they now organize foreign excursion for their students, sending these kids to foreign countries for holidays thereby psychologically preparing them for schools abroad at the same time putting a strain on the economy through the trips……government should start imposing heavy tax on schools who practice these acts.
Number of Foreign Students outside Their Shores and their Trade Surplus…………..
In 2015, Forbes magazine reported that The United States had about 290,000 students studying abroad in 2015, but with an influx of about 742,482 students into its economy, the United States had a trade surplus of 452,482 students. In 2013/2014, the British Council reported that 28,640 UK students went abroad to school, but the British had 493,570 foreign students come to the UK to study that same year creating a trade surplus of 464,930 students contributing to the UK economy.
Coming home to Africa…….Institute for International Education reported in 2012 that South Africa had 6,378 students studying outside the country, the same South Africa has 70,428 foreign students schooling in the country and has a trade surplus of 64,050 contributing to its economy. Egypt has 19,744 students studying abroad, and at the same time a host to 49,011 with a trade surplus of 29,267 students contributing to its economy…
The question then remains, with the humongous number of Nigerian students abroad draining the country’s foreign reserve, we do not have foreign students in Nigeria on a trade balance or trade surplus for the country…..it is a massive trade deficit that is killing the country.
The Nigerian Government must change its strategy of investment in the annual budget of the economy…..education is a critical institution for economic sustainability….and any country that abandons it’s educational sector abandons both its progressive and economic future.