Finance

ASUU strike and funding options for government


The higher education sector has a critical dual role to play in every society: on one hand, producing a higher-level capable workforce and updating those already in the workforce for the nation to achieve global competitiveness. On the other hand, conduct research and development that contribute to the economic growth of the nation.

In Nigeria, however, this is not so as the higher educational institutions are bedevilled with uncertainties and disruptions that potentially immobilise the dual role aforementioned. These uncertainties and disruptions are triggered by the fact that government actions are not in tandem with that of other developed nations that believe that continuous investment of public money in higher education attracts considerable real economic returns for the Nation. Besides the political rhetoric of present and past government officials, there is no actionable evidence to support that the Nigerian government indeed believe there is an economic benefit to be gained with the continuous financing of higher education.

Private universities in Nigeria are outside the scope of this article as I focus on public higher education institutions (PHEI), which have in their community, the majority of Nigerian students because of the current subsidy that sector enjoys.

In reality, if an honest assessor conducts a value check, the result would reveal a seemingly rising weak value for money for recent graduates of PHEIs in Nigeria. This alone remains the root cause of the perception that “education is a scam” or more profoundly, PHEIs have become an anachronistic and risky pathway to professional competency. In other words, PHEIs graduates’ quality in Nigeria is under threat, which is a leading contributor to rising unemployability and migration abroad in pursuit of better education.

Let me concede, however, that the threat to graduate quality is not limited to Nigeria alone, necessitating  the considerable pressure on the government of developing countries to find solutions to address this threat in line with SDG 2030 target 4 – “ensure inclusive and equitable quality education.” But what makes the Nigerian case peculiar is the apathetic attitude of the government towards improving the quality of their tertiary institutions. The brazing reluctance and nonchalant attitudes various past and present governments in Nigeria have displayed towards providing sufficient funds to improve the budgetary allocations of universities or even consider it worthwhile, to honour agreements reached with the academic staff union of universities (ASUU) in 2009 and 2020 beggars belief.

Currently, ASUU is on strike, rolled over for another 12 weeks, after the initial 4 and 8 weeks. Opinions are diverse on this recent strike, which came after 9-month strike action by ASUU in 2020.

As a lecturer, I am sad and disappointed that we have to down tools. Yet, ASUU’s demands are pertinent. Universities are underfunded and neglected. It should not be an abode for intellectuals anymore in the current state infrastructure-wise. The hostels and lecture halls are dilapidated.  The existing faculties, laboratories, workshops, and libraries are sub-standard to put it mildly. The welfare of the University workers remains negligible.  This is reflected by the current closure of all Federal and some State Universities after various other unions within the universities (The Senior Staff Association of Nigerian Universities [SSANU] and the Non-Academic Staff Union [NASU]) embarked on strikes demanding better welfare and infrastructural upgrade.

Besides the welfare and physical challenges, our educational methodologies are stale. Innovations in technological advancements have grown rapidly, changing educational methodologies and the way courses are taught globally. However, in Nigeria, our teaching pattern remains traditional, which is seemingly an ineffective educational approach. Our current educational structure would not make our graduates appealing to hiring firms not ready to engage them in additional capacity building.  This is because the current university curriculum is deficient in analytical performance, critical thinking and soft skills strengthening, resulting in low productivity and poor leadership in vocations and professions. All these are embedded on the call by ASUU, which unfortunately does not make the headline as only enhanced welfare is often made the key reason for the strike.

Without dwelling on the pros and cons of the strike, our universities need urgent funding to meet ASUU’s demand so the universities can reopen and students return to various campuses to revive economic activities within their localities. The Federal government is not responding to their demands citing lack of funds to meet over a trillion-naira request by ASUU. Various funding options are available for short and long-term implementation:

The first option is a concession. According to European Commission, concessions involve a contractual arrangement between a public authority and a private investor, where the latter provides services or carries out works and gets remunerated. It is expected that private investors will inject the required resources, which will improve the infrastructure and quality of tertiary education. This option is very attractive to the government as it absolves them from funding the university since the financial risk would be transferred to the private investor.

Nevertheless, the downside is the potential rise in tuition costs outside the reach of many students from poor homes thereby negating sustainable development goal (SDGs) 4.3. that by 2030, the government must, “ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.”

Other factors making this option unappealing for low-middle income countries include the following: first, with an increase in tuition fees, the country would seemingly witness a significant drop in the number of enrolment and graduates. This will affect the potential workforce that will service the entire economy. Firms and businesses may resort to importing workers from abroad at a higher cost with its inherent capital flight and pressure on the Naira. Second, some experts posited that government can provide student loans to mitigate the drop in the number of students. This is dead on arrival because we would most likely experience increase in non-performing loans as graduates on student loans without a good job, and attractive salary (not minimum wage) will struggle to meet repayment timeline. The government may end up bailing out banks.

The second funding option for the government is to borrow N1.3 trillion from over 26 trillion of our pension funds. Pension funds belong to the institutional investors’ category. Lately, institutional investors seek long-term investment to deploy their assets. Luckily, the Nigerian population is young, which means a significant amount is not reaching retirement age or retired, a favourable factor pension fund managers consider before going long on investment since they pay out fewer benefits than they receive in contributions. Understandably, National Pension Commission (PENCOM) frowns on investment outside markets or financial instruments, to guide against unreasonable risk-taking by administrators, which could lead to investors’ funds’ impairment.  However, this practice is at variance with the global pension industry, which is seeking to diversify in other sectors like education and long-term infrastructure.

The third option is to borrow from insurance companies. This option is worth considering since pension funds sometimes prefer syndicating investments, that is, to invest jointly in a consortium either with investors in the same category to spread out the risk, or invest with those with the capacity to manage potential educational risk. Life insurance and motor vehicle insurance accumulate long-term funds through premiums from policyholders only paid out upon the insured’s death or in the case of a motor vehicle, a claim is made as a result of an accident.

While the last two options are debt-led, the government can also fund education through exactions. Exactions are an attractive strategy for deriving additional investment in needed infrastructure in high-growth areas and where a country’s fiscal capacity is limited. Hypothetically, if motor vehicle insurance cost is increased by N5000, while the original insurance fee goes to insurance companies, the additional N5000 can go towards funding of tertiary education. This could also apply to car licensing and flight costs or in luxury items. For instance, if N5000 extra is added to the cost of flight per domestic passenger, license and motor vehicle insurance annual renewals, which are all payments made by those above the poverty line; the government will have N182bn annually. Here is the breakdown: with the 12.9million passengers that travelled on domestic flights using data obtained from Statista, the government would get N64bn annually from that category. Likewise, if the same amount is added to motor license and insurance renewal, using NBS 2018 data of 11.8million annual car licenses and insurances. The government would have N59bn each. In total, the exactions from these three items would give the government N182bn annually. An additional 20bn from the government treasury would meet 200bn annual payment ASUU demands and the strike would simply evaporate.

It is my humble submission that any of the above-listed options is a good place for government to start the gradual withdrawal from tertiary education funding through budgetary allocation pending when the universities can galvanise the endowment funding pattern through their various alumni branches. Since this administration is at the tail-end of its dispensation, they could put in place necessary legislation and policies that will allow the next dispensation to hit the ground running.


 

Dr Chidiebere J. Anago is an infrastructure finance/PPP expert and holds a lectureship position with the University of Nigeria, Enugu Campus. He can be reached via: canago@outlook.com



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