The abysmal state of Nigeria’s social infrastructure (health, education and social security) could better be fixed by the adoption of endowment funds, according to a report by global consulting firm, PricewaterhouseCoopers (PwC).
Endowments are restricted funds that are essentially gotten from charitable donations, private investments, among other sources. This becomes the principal, which is then invested with a fund manager to earn income. The income earned is then used for very specific purposes that are articulated in a charter.
“Nigeria needs to find sustainable ways to fund its education and health sector and one of such sustainable strategies is through the adoption endowment funds, which have successfully established in the West and will take little or nothing to implement in Nigeria,” PWC said.
While Nigeria’s budgetary allocation to the education sector has declined over the years, its peers have actively taken steps to increase their spending commitments in these sectors.
South Africa’s education budget as a total of the national budget in 2017 stood at 21 per cent while that of Ghana was 19 per cent. Similarly, Kenya’s budget to the educational sector stood at 16 per cent.
However, this could not be said of the continent’s most populous nation as the country only struggled with a 7.3 percent allocation within the period.
Aside from the fact that budgetary allocations to key sectors driving human capital development have headed southward, banks, on the other hand, have stifled lending to these sectors.
Bank loans to the education sector stood at N57.3 billion—the second-least, representing about 0.38 per cent of the total N15.13 trillion credits to the private sector as at Q4 2018, according to National Bureau of Statistics data.
According to the report, relying solely on the government to fund tertiary education is no longer adequate because of the growing government budget deficit and a need to focus on hard infrastructures such as transport network and power.
Nigeria has the highest number of out-of-school children in the world. According to UNICEF, 10.5 million children are believed to be out of school, a figure that represents approximately 20 percent of the total statistic.
The national budgetary allocation to the Education sector in 2018 of 5.4 percent was way below the UNESCO benchmark of 25 per cent. With an education funding of N498 billion (5.4% of the total) in 2018, Nigeria needs over N1 trillion to close its education funding gap.
“Most higher education institutions in Nigeria have significantly profound alumni members who make donations to their alma mater via registered or non-registered alumni associations. These donations can be structured into an endowment fund for better and sustainable outcomes. In return for their donations, the alumni members earn income in the form of return on investment on an annual basis or as predetermined in the endowment charter,” the report said.
“Furthermore, funds under management in an endowment fund can be loaned to the government for infrastructure projects in local currency. This is because we expect most endowments funds to have low-risk appetites, particularly in the short term. Therefore, many will opt for government bonds and treasury bills and become a significant holder of Nigeria’s debt like the Pension Funds”
