Nigeria’s Federal Government has been criticised for giving less money to education than would be needed to make the sector vibrant and banks think the sector is unripe for investment, latest data from the NBS show.
The National Bureau of Statistics’ Selected Banking Data report for the fourth quarter of 2018 said total banking sector credit to education for the quarter was 0.38 percent, representing N57 billion. The sector that got the least credit from the banking sector was mining and quarrying at 0.14 percent, which represented N20 billion.
Banking sector credit to education for 2018 in the three months ending March was 0.47, same as for three succeeding months ending June. It dropped to 0.39 percent in the third quarter.
“In Nigeria, investors in general and financial institutions in particular shy away from investing in education because they have a hard time measuring return on investment. Bankers do not understand what schools are doing and schools seem not to understand the language of investors” said Bunmi Lawson, Managing Director/CEO Accion Microfinance Bank Ltd.
Since 2015, banking credit to the education sector has remained below 1 percent. Compared to other sectors such as oil and gas with an average of 8 percent and the government with an average of 9 percent, education is clearly not a darling of Nigeria’s lenders.
“A lot goes into building and running a school beyond putting up classrooms. Education investing is definitely more profitable at the secondary school level than at the university level” Chidi Nwagu, Manager, University Development at the Pan-Atlantic University, Epe, Lagos said on a phone interview for an earlier report.
Federal Government’s spending on education has also been declining. In the 2015 fiscal year, N392.2 billion was allocated to education, representing about 8 percent of the N5.068 trillion budget.
In 2016 the sector got N369.6 billion representing 6 percent of the total budget of N6.061 trillion. In 2017, it was N550 billion representing 7.4 percent of the N7.444 trillion total budget, while in the 2018 appropriation bill of about N8.612 trillion, N605.8 billion was proposed for capital projects in the education sector representing 7 percent.
Experts say one way to reverse this trend is by finding a public-private-partnership that works. Already, private schools are overtaking public ones in numbers.
In 2014 there were an estimated 18, 000 private schools in Lagos state and about 1, 800 public schools.
Proprietors of these private schools often have an informal approach to managing their schools. They do not see these schools as businesses and have historically found it difficult to tap into the formal financial sector to access financial services and products such as loans, a Developing Effective Private Education Nigeria (DEEPEN) survey showed.
But a new funding model for schools is emerging. Private equity firms are seeking to invest in both mid and high-end private secondary schools to drive expansion initiatives amid growing interest among parents to educate children in such schools.
Verod Capital Management, a Nigeria based private equity firm, in July 2017 acquired a stake in Greensprings School, one of Nigeria’s leading private secondary schools located in Anthony and Lekki both in Lagos, bringing the number of its investment in private secondary schools to five. This was designed to enable Greensprings restructure its capital base and fund growth initiatives.
“Greensprings has a long track record of academic excellence and is led by an experienced CEO and management team,” said Eric Idiahi, Partner at Verod in statement announcing the deal.
