EDUCATION GROWTH IN NIGERIA: DOES FORGONE EXPENDITURE ON EDUCATION MATTER?

Abstract

This paper investigated the education sector's budget shortfall based on UNESCO's recommendation of a 15–25% budgetary allocation to the education sector for developing countries (forgone expenditure) and its effect on education growth in Nigeria using annual data from 1981 to 2019. This paper used Vector Error Correction Mechanism (VECM), impulse response, and variance decomposition simulations to explain the response to shock amongst the variables. In addition, the study used the VECM Granger causality approach to understand shortrun causation among variables through F-/Wald test simulation. Later, the aforementioned simultaneous system equation is evaluated using ordinary least squares (OLS). In its three lags, empirical results show that forgone education spending has a positive and substantial association with education growth, whereas real education expenditure has a negative relationship with education growth. The VECM Granger causality result also shows that forgone education expenditure causes education growth. A closer examination of the impulse response function reveals that foregone education expenditure will contribute to educational growth in the short and long run. Based on the findings, the government should boost its share of education spending to achieve the UNESCO recommendation of 15–20%. Furthermore, government education spending should be properly managed in order to improve educational growth.