Education Workers' Strike in Nigeria: Causes and Implication

Source: Channels.tv

Over the past few months, the world has witnessed many striking issues ranging from the government shutdown in the United States to the sudden fall in the Indian Rupee, the Kenyan Westgate Mall shooting, the issues in Syria, Egypt, and beyond. But none of these touches me like the issues from Nigeria especially the ongoing Academic Staff Union of University (ASUU) strike. Not only because I am a Nigerian, but largely due to the fact that my role as an economist keeps bringing me in contact with country facts that I find difficult to ignore. I decided to write this piece in order to provide a clear-cut knowledge of existing trends on education expenditure and linkage with work disputes/strike actions, unemployment, and economic growth. I draw on several reports and data from the Central Bank of Nigeria (CBN), Nigerian Bureau of Statistics (NBS), World Bank, United Nations Educational, Scientific and Cultural Organization (UNESCO) among others to capture trends and developments surrounding strikes and their implication for the youths and the Nigerian economy as a whole. After a careful synthesis, it became obvious that a better funding mechanism for education in Nigeria is urgently needed for the country to become a serious player in the new global economic, social, and political order.

A Retrospective look at Education funding in Nigeria

The general economic downturn of the 1980s resulted in instability and financial inadequacy for the Nigerian educational system. Crisis between 1979-1999 led to several work stoppages. Regular occurrences include unpaid teachers’ salaries, the degeneration of educational facilities and infrastructure at all levels and the attendant common place strikes across all tiers of Nigeria education system. Poor financial investment has generally been seen as the plague of Nigerian education system so much so that budgeting allocation has been very low compared to other sectors.  During the oil crisis in the 80s, the administration and funding of the Universal Primary Education (UPE) scheme were decentralized. At college and university levels, the changes included the termination of the student–teachers’ bursary awards and subsidized feeding for students in higher education institutions. Furthermore, the federal government allocation to education has declined steadily since 1999 and this is particularly important in view of the huge rise in intake at all levels of education – primary, secondary and tertiary. In 1999, the government scrapped the National Primary Education Fund (NPEF) and reconstituted it under another name (The National primary Education Commission). This action was taken in recognition of the states' and local governments’ constitutional responsibility for financing and managing primary education. An alternative source of funding for education explored by the government is the Education Tax Fund (ETF, 1995) which ensured that companies with more than 100 employees contribute 2% of their pre-tax earnings to the fund. Primary education receives 40% of this fund. Secondary education receives 10% and higher education 50%. Primary education has in the past also received from the Petroleum Trust Fund (PTF) for capital expenditure and provision of instructional materials. In higher institutions, gifts, endowment funds, consultancy services, farms, satellite campuses, pre-degrees, etc are other alternative funding sources.

Despite all the alternatives, infrastructure and facilities remain inadequate for coping with a system that is growing at a very rapid pace. As a result of poor financing, the quality of education offered was affected by poor attendance and inadequate preparation by teachers at all levels. The morale of teachers is low due to the basic condition of service and low salaries. A recent World Bank Development report pointed out problems emanating as a result of this which can be called "functional illiteracy": increasing enrolment rate but with a missing quality-application of knowledge-dimension in literacy. In addition, physical facilities need to be upgraded and resources such as libraries, laboratories, modern communication and Information technology equipment have to be provided. The quest for meeting these basic education needs has been the cause of an unending crisis between government, and trade unions such as ASUU, Nigeria Union of Teachers (NUT), and Non-Academic Staff Union (NASU). 

A close look at the distribution of government budgetary allocation to education as a percentage of the total budget shows a level of inconsistency. Instead of maintaining an increasing proportion of the yearly budget, it has been largely fluctuating since the introduction of SAP in 1986. Regardless of incessant strikes and negotiations to stimulate governments to increase the proportion, the proportion has been below 8% apart from 1994 and 2002, which were slightly above 9%. A breakdown of the education allocation to capital and recurrent expenditure is shown in the chart below. Since the oil crisis in the eighties, the proportion of capital budget allocated to education has been consistently lower than the proportion of recurrent expenditure. Over the years, the government capital expenditure allocated to education as a percentage of the total capital budget ranged from as low as 1.71 in 1999 and not up to 9% in all cases. This has retarded progress in building new facilities and meeting growth challenges.

Chart 1: Capital and Recurrent Expenditure on Education in Nigeria

The estimates of government education expenditure in Nigeria as a share of GDP and of total government expenditure can be compared to the situation in other sub-Saharan African countries. UNESCO’s World Education Report 2000 presents the data for 19 countries across sub-Saharan Africa for 1996. The average share of GDP was 4.7% and government expenditure was 19.6%. In both cases, the measures of educational expenditures for Nigeria (2.3% and 14.3% respectively) are relatively low. Again from the sample of state government education expenditures, plus the Federal and local government expenditures, it is possible to provide an approximate set of shares of expenditure across levels of education for 1998 for the country as a whole. These values are: 35.6% primary, 29.0% secondary and 35.3% for all tertiary institutions, including 19.0% for universities. The shares across education levels for Nigeria can again be compared to those in other countries. Across 18 sub-Saharan African countries in 1996, the shares were 48% primary, 31% secondary, and 21% tertiary (UNESCO, 2000). According to CBN (2011), the allocations to primary schooling were significantly lower in Nigeria and those to tertiary education significantly higher. Public investments in social and community services accounted for 10.0% of the total in 2011 and as a ratio of capital spending, expenditure on education declined to 3.9% in 2011 from 9.9% in the preceding year, while that on health rose from 4.0% in 2010 to 4.3% in 2011. At the states level, an analysis of spending on primary welfare sectors indicated that expenditure on education decreased by 17.0 percent from the level in 2010 to N212.6 billion ($1.34billion) and accounted for 6.0% of total expenditure (CBN, 2011).

Chart 2: Federal Government Share on Education as a share of Total Federal Expenditure, 1997-2001

Chart 3: Federal Government Share by Level of Education, 1996-2000

Moja (2000) has shown that the building of classrooms has not kept up with the increase in enrolments in all levels of education in Nigeria. Primary schools and secondary schools are worst affected where classes are offered in the open-air leading to class cancellations and a lack of quality instructions. In several secondary schools, as many as four classes, are accommodated in one classroom. These are classrooms that are already jam-packed and in a poor state of repair with licking roofs and broken windows. In tertiary institutions, the picture is not different. It is a common phenomenon for students to sit on bare floor or hang by the window side because lecture rooms cannot accommodate them. In addition, laboratories and equipment are grossly inadequate. The attendant problems in terms of quality of education usually tell on the competence and effectiveness of the products.

Man-days Losses Due To Strike
The problem of education funding has been over the years a subject of great concern to all stakeholders in the sector. The magnitude of the problem has consistently led to strikes by NUT, ASUU, NASU, and other bodies coordinating the grievances of the workers. The cornerstone of the struggle is to make the Nigerian state to be responsive to the problems. As shown in Chart 4, the strikes cause the nation serious man-day loss. It ranged from N27,072($172) in 1972 to about N234million($1.49million)in 1994. Apart from 1995 when the loss dropped down to about 2 million, it has been more than 100 million man-days since 1996. The number of declared trade disputes in 2003 declined by 2.0% to 49%, in contrast to an increase of 11.1% in 2002. Of the total trade disputes declared, 42% or 85.7% led to work stoppages involving about 302,006 workers (CBN 2005). The total man-days lost to the work stoppages, including the six months of industrial action embarked upon by ASUU in 2003 were put at over 5.5 million.

Chart 4: Man-Day Lost due to industrial Strike Actions and Trade Disputes in Nigeria with 1994 values isolated

Chart 5: Man-Days lost due to industrial strike Actions and Trade Disputes in Nigeria, 1970-2004

Mechanism for Translating Education Allocation to Economic Growth

Earlier literature indicates that the quality of education in some Nigerian institutions in the 1970s was comparable to the high-quality education offered by top world universities. Sadly, however, the quality of education offered by higher education institutions at the present time has deteriorated substantially. The effect of the poor funding on students, apart from fear of an increase in tuition fees or its introduction in federal universities is that they are mostly ill-equipped for self-employment and or entrepreneurship in a context where limited jobs exist to absorb them in the nation. The poor quality of many Nigerian university graduates has accelerated. As a result, there is high unemployment amongst graduates, especially in fields such as engineering. There is also concern about the lack of recognition of Nigerian degrees by overseas universities. If education allocations are increased to meet all the basic infrastructural and recurrent needs such as ICT facilities, standard libraries, laboratories, and workshop facilities, and the institutions are made to have an adequate enrolment base that is open to all Nigerian irrespective of ethnic derivation, social status, religion, and political aspiration, teachers shall be highly motivated, conscientious and efficient in the delivery of their services. These will produce able manpower capable of uplifting the cultural, social, scientific, and technological development as well as developing the talents of young citizens. The knowledge produced for industries, agriculture, and scientific and technological development will translate to an increase in national income. Ajetomobi and Ayanwale (2005) concluded that like yam, the size of yam set planted determines the size of yam tuber harvested, increase in government education allocation to 26% as recommended during ASUU-FGN negotiation of 1992 and 2001 tremendous growth in the economy will result. At the moment, unemployment rates have been steadily increasing and over 1.8million new entrants into the labour force (predominantly youths) are encountering increasing difficulty in finding gainful employment.

Chart 6: Population growth, Economic activity, Labour force, Employed and Newly employed and Unemployed, 2006-2011

Chart 7: Unemployment in Nigeria by age group and Rural/Urban Area

Chart 8: Unemployment is trending upwards in Nigeria, 2000-2009

The final word is that despite the fact that education emerges as a critical determinant of knowledge spillovers and entrepreneurship across 1500 subnational regions in 110 countries, why has Nigeria failed to fund its education? We can continue the conversation on twitter Tweet to @seunoyeniran

Reference
Ajetomobi J.O* and Ayanwale A.B (2005) Education Allocation, Unemployment and Economic Growth in Nigeria: 1970-2004, World Room at Texas A&M University 
UNESCO (2000), World Education Report. Paris

World Bank (2001), World Development Report 2001. WashingtonDC

Hinchcliffe, K. (2002). Public Expenditure on Education in Nigeria: Issues, Estimates, and Some Implications. Abuja, World Bank.National Bureau of Statistics, Labour Force Survey 2009

Moja, T. (2000). Nigeria Education Sector Analysis: An Analytical Synthesis of Performance and Main Issues. Abuja, World Bank.

http://www.nicn.gov.ng/k9.phphttp://www.cenbank.org/OUT/PUBLICATIONS/REPORTS/RD/2002/AREPORT-02-1.PDFhttp://www.cenbank.org/OUT/PUBLICATIONS/REPORTS/RD/2003/CBN%20ANNUAL%20REPORT%203.PDFhttp://www.cenbank.org/Out/2012/publications/reports/rsd/arp-2011/Chapter%205%20-%20Fiscal%20Policy%20and%20Government%20Finance.pdfhttp://www.cenbank.org/OUT/PUBLICATIONS/EFR/RD/2008/EFR-VOL.44-NO.3-PART%201.PDFhttp://www.cenbank.org/OUT/PUBLICATIONS/REPORTS/RD/2007/STABULL-2005.PDFhttp://allafrica.com/stories/200512310279.htmlhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/---integration/documents/publication/wcms_079136.pdfhttp://www.vanguardngr.com/2011/11/4-75million-man-days-lost-in-6yrs-to-strikes/http://worldroom.tamu.edu/Workshops/Africa07/Nigeria/Education,%20Unemployment%20and%20Economic%20growth.pdf

Deregulation of The Downstream Sector of the Nigerian Oil Industry (Part 3)

Feasibility | Contestability | Sustainability

Revenues from Nigeria's Oil resources has not
translated into substantial economic gains

Although the recent Occupy WallStreet is a major advocacy against corporate greed, the free market upon which this corporate organizations are built hold key values underpinning the modern economy. But we also need the government to play its own role in strengthening the operating environment thereby allowing a level playing ground for businesses. When some foreign firms make supernormal profits at the detriment of the common man, the common man is bound to revolt. Obviously, perfect market scenario create the efficient and welfare maximizing structure and behaviour for the common man particularly because allocative and technical cost considerations as well as pricing mechanisms are always favourable. Monopolists are not necessarily inefficient but our major concern is in terms of their pricing mechanism, their absolute freedom to set prices and the resultant supernormal profit is what raises concern. What we need to think about then is how do we ‘contest’ the monopoly powers in the downstream oil sector in Nigeria?

Contestability will ultimately result to Sustainability

A market is feasible (a usual condition for markets) when it clears (i.e. Total output=Total demand at price P) and firms that operate within the industry are not making negative profit.  More importantly a market is sustainable if above all it is feasible, no new entrant into the market can make profit (given incumbent price). If this is the case, it implies that marketers must set prices sufficiently low so much so that any further price reduction will lead to negative profit. But monopolist (especially the ones that operate in Nigerian oil market) will hardly ever bring their price that low. We can only attain an economically sustainable point in premium motor spirit (PMS/Petrol) and related product pricing when government encourages contestability rather than regulate (control-which brings about more corruption as will be discussed later) or renationalise (total government ownership- which is characterized by greater inefficiency, waste more corruption) is introduced. So let me stop making the term “contestability” a cliché, this is what it means in principle:

“A con-testable market is one into which entry is absolutely free, and exit is absolutely costless” Baumol (1982) [1] “The market price is independent of the number of firms currently serving a market because the mere possibility of entry suffices to discipline the actions of the supplier” (Browing and Zupan, 2009)

“The threat of entry is enough to cause the incumbent monopolist to price at the competitive level”

Let me demonstrate the idea with this diagram:

Click to enlarge

While the idea of contestability is very rare in real market scenario, it is a broader ideal which has a wider applicability based on the perfect market model and it is obviously an extension of Adam’s smith theory of the invisible hand.

This is what we advocate for in summary that government can promote sustainably low prices by encouraging contestability. As much as possible, government must ensure that barriers to new entrant into the oil market be removed. When the monopolist is contested, we can witness powerful optimal results: Prices will fall from Pm to Pc (see Diagram A), firms operate in a unique environment where zero profit is made; prices are equivalent to the average costs of the firm and best (second-best) pricing can be achieved. We also don’t need to regulate the industry as there will be a level playing ground for firms. No need for government to be involved. But we need to keep an eye on the fact that incumbent monopolists still have their way of erecting entry barrier upon which they still make their supernormal profit.

The Downside: Corruption

Just as I have always anticipated in previous posts that most of the figures available to us may be subject to inaccuracies, I am not at all surprised as a recent Sahara Report of the Ministry-of-Finance-aidedKPMG forensic report of the NNPC shows various levels of anomaly. We know that if government has truly been subsidizing as it claims our people should be better off; the hardship would not be this pronounced. it seem clear now that both the recent importers/marketers have questions to answer and the NNPC responsible for of paying the huge billions of subsidy money as well as handle all Nigeria’s oil transaction have develop mastery in diverting a portion of these money for personal benefit, leaving the masses struggling to meet their daily need. It’s a low blow for someone like me who claim Nigerian in overseas country when faced with such report of corruption.

The upside: Corruption will be dealt with

But we will not give up. As the global disparity become more pronounced - emerging economies becoming brighter (especially those in Africa) while the western world witness shortfalls (climaxed in the EU crisis and poverty spikes in the US) - we will continue to advocate for efficient optimal solutions for our dear country. We are optimistic that our nation is at a cross-road, where God fearing people have to take their stand in corporate and governmental arena. Not just Christians (many have failed us), we need sons and daughters of God who will not compromise God’s standard in their daily dealing. I believe you and I can bring that so much desired, long awaited change. But first, we must change ourselves. Now is the time for change.

Seun Oyeniran

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[1] [‘freedom of entry’ is used carefully here. It does not mean that it is costless or easy, but that a new entrant suffers no disadvantage in terms of production technique or perceived product quality relative to the incumbent monopolist, and that potential entrants find it appropriate to evaluate the profitability of en-try in terms of the incumbent firms' pre-entry prices]

References

Smith, Adam (1977) [1776]. An Inquiry into the Nature and Causes of the Wealth of Nations. University Of Chicago Press

Baumol, W. J., (1982), Contestable Markets: An Uprising in the Theory of Industry Structure, American Economic Review, Vol. 72 No. 1, pp. 1-15

Baumol, W. J., Bailey, E. E., and Wil-lig, R. D., (1977), ‘Weak Invisible Hand Theorems on the Sustainability of Multiproduct Natural Monopoly’, American Economic Review, 67, 350-65.

Browning, E. K.,  and  M. A. Zupan, (2009), Microeconomics: Theory and Applications, John Wiley & Sons Inc.

Deregulation of The Downstream Sector of the Nigerian Oil Industry

The Struggle for Optimality

Petrol is an essential commodity. As one of my friends always asserts, after water, another product the common man cannot do without is petrol. It is therefore not a surprise that any policy adjustments that concerns this essential commodity raises the attention of not only the masses, but also key stakeholders like the Nigerian Labour Congress (NLC). While the issue of deregulation is an extensively broad one (I must confess), we will better understand the concept when we furnish ourselves with some level of information. The first idea we need to carry on is the fundamental idea of Optimality (Pareto Optimality) put forward by Vilfredo Pareto. Pareto Optimality is a situation where social efficiency is attained. And social efficiency is only attained when changes in production or consumption can make at least one person better off without making anyone else worse off. We are all rational in our economic behaviour, we tend to maximise our tendencies towards increasing activities that produces higher marginal benefit than marginal cost and do less of activities whose marginal cost exceeds marginal benefit. Inevitably our businesses (including those in the downstream oil sector) are handled in this economically rational way. We will apply this basic understanding of optimality vis-a-vis price theory and simple demand and supply analysis, to explain the struggle towards deregulation of the oil industry in Nigeria.  

Petrol Demand, Regulatory Framework and Black Market

Markets (firms, businesses) are always aiming for private (business) efficiency so their model is predominantly tilted towards profit maximization. It is always the role of government (and other regulatory machineries such as the PPPRA) to bring the private sector to social efficiency where their operating cost covers also for the externality they produce.  It is the involvement of government, this struggle to attain Pareto Optimality or Social Efficiency, that brings about price controls which comes in form of taxes or subsidy. But because petrol is an essential commodity (where demand-price ratio is inelastic), many firms operating within the downstream oil sector are natural monopolists that set prices by themselves. The pump price that gets to the consumer is usually a function of the landing cost of imported refined crude oil. While the four refinaries in Nigeria (two in Port-Harcout, one in Warri and one Kaduna) remain at non-functional state, many regulatory attempts to change the pump price has led to sudden shortage in supply due to excess demand as shown in the diagram above. Since demand remains very high, many of the traders will sell at the ‘Market Price’ Pe, rather than the 'Official Price' P1.  Even so, many of the masses are still willing to pay for the high price at Pe. Keeping the prices mandatorily at P1 leads to persistent product supply shortages (Q2) while demand remains high at Q1. The fact that people want to still buy at Pe, despite regulatory frameworks, is actually cause of ‘Black Market’. Until there is a way that the ‘Official Prices’ Balances with the ‘Market Prices’, Nigeria will continue to have shortages which are in reality ‘disguised shortages’(since the traders are monopolists). To ensure that shortages are not witnessed nationwide and to support the masses, government apply subsidy so as to 'disguisedly' maintain the prices at less than Pe or probably at P1. BusinessDay newspaper recorded the amount of this subsidy to averages N400 billion per year between 2006 and 2008 increasing to about N600 billion in 2009.

Critical Questions

Moving forward, the first question to ask is that are we really not buying Premium Motor Spirit popularly called petrol or gasoline and other related products at the market importation landing cost even though we say there is subsidy? With our level of corruption, have we really witnessed subsidy in the first case?  The second issue is that if truly subsidies need to be provided, how can these prices balance? Will government continue to pay subsidies as other regulatory machineries struggle for consistent fall in prices of petrol? Or do we leave the market forces of demand and supply to control the price of petrol by itself by introducing contestability? We may want to ask finally that how do we really achieve Pareto Optimality or Social Efficiency that will lead to higher welfare gains for the common people? 


As I look through the lines again, preparing for the next post on this blog which will be a sequel to this very post (where I explore the implication of the removal of subsidy and the advent of privatization in the downstream), it is imperative we call ourselves to earnest prayers for the country. This blog remains firm on a positive note that Nigeria will be great, albeit only through divine visitation. What seemed like 'resource curse' in the time of Elisha was reversed by divine intervention (2Kings 2: 19-22), it can happen in Nigeria. We need God's instrumentality.  


Seun Oyeniran


Reference
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