PUBLIC EDUCATION EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA: 1970 - 2010

PUBLIC EDUCATION EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA: 1970 - 2010

ABSTRACT

Theoretical and empirical evidences support the prime role of public education expenditure in rapid and persistent economic growth. However, available statistics in Nigeria does not seem to support this view. An average of 5.72 per cent of public expenditure was spent on education between 1970 and 2010. During the same period, economic growth was not only inconsistent, but averaged 0.6 per cent. Public education expenditure, no doubt promotes educational attainment which could be regarded as a proximate target. It could also have a direct effect on economic growth through the multiplier effect of government spending. These relationships are seldom captured by empirical studies especially those based on Nigerian data. Also issues such as endogeneity problem associated with growth empirics are often overlooked. This is evident in the specification of empirical models and consequently the lack of consensus in the results obtained. In a nutshell, the channel through which public education expenditure affects economic growth is not yet well understood. This study examines the direct and indirect effects of both public recurrent and capital expenditure on education and economic growth in Nigeria from 1970 to 2010.The Instrumental Variable Two Stage Least Squares (IV2SLS) estimation technique which ensures both unbiased and consistent coefficient estimates is employed. The result reveals that public education expenditure has both direct and indirect effects on economic growth. The indirect channel has been more relevant for economic growth in Nigeria. Thus, total public education expenditure can promote economic growth without necessarily first improving education attainment.. The study also reveals that public recurrent education expenditure (pree) and public capital education expenditure (pcee) have different effects on economic growth. The regression results suggest that capital expenditure has greater effect on education (proxied by secondary school education) while recurrent expenditure has greater effect on economic growth. However, to maximize the benefits from public education expenditure, strategies that ensure greater efficiency of public education expenditure were suggested.

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