CHAPTER ONE/INTRODUCTION

Monetary policy is governed by the CBN. It is the classic example of a regulatory body. The standard for making regulatory determinations, such as the one it is putting out regarding the redesign of the currency, is that the regulator may only take action if the advantages of the suggested course of action outweigh the disadvantages. In addition to financial and commercial costs and advantages, a thorough cost-benefit analysis would also include social and political costs and benefits.

We should be aware that money is very important to a nation’s economy. It decides factors like general price levels, total national revenue, output and productivity, levels of employment for labor and capital, and exchange rates. and the payment balance.

It is generally recognized that redesigning money might reduce counterfeiting, particularly in cases where the security of the current design can be readily gotten through. The development and production of new currency would need billions of Naira in public monies, which is another truth. To support this design and printing of the new Naira, CBN should provide reliable figures demonstrating the proportion of counterfeit Nairas in circulation. According to the CBN’s most recent report, the 2020 Currency Report, 67,265 counterfeit notes totaling N56.83 million in nominal value were seized in 2020, representing a 20.80% decline in volume and 12.18% fall in value compared to 84,934 pieces valued at N64.71 million in 2019. 100 is the global average for counterfeits per million. In 2020, there were 13 pieces of counterfeit currency for every million banknotes in circulation, down from 20 pieces per million in 2019. This demonstrates that the problem of counterfeit money is not as pervasive as would need a modification of the currency.

The CBN asserts that hoarding is the reason it is also revamping the Naira. Given that the Naira-Dollar depreciation is now so high, CBN must utilize fake value, this allegation should be thoroughly investigated. At least three devaluations of the naira occurred between 2021 and 2022, and it seems that there will be at least one more. This devaluation, together with rising inflation, will decrease the naira’s buying power. The CBN’s assertion that a currency whose value is sharply declining is being hoarded in large quantities defies economic sense. The political elite has the ability to accumulate such vast sums and would have had the ability to convert it to dollars. The CBN Governor’s contention that a redesign of the currency would hinder ransom payment is further undermined by the conversion argument. Naira redesign alone won’t stop the rise of inflation in this nation, particularly when this approach doesn’t recognize the true worth of the Naira. In fact, it may lead to more inflation since those who had large sums of illegally obtained Naira might use them to buy expensive goods or engage in currency exchanges that would boost the economy’s growth.

The CBN could perhaps carefully examine the numerous disastrous policies that caused this inflation, including its increased propensity to print money for the Federal Government, its direct financing of Nigeria’s budget, and its violations of the CBN Act by going over the 5% threshold of the Ways and Means Law and printing money for State allocations. The activity of redesigning the currency is neither free nor inexpensive. Many trillions of dollars will be spent by taxpayers. The cost of the redesign, logistics, and printing will be high. The money needed to pay for this is not inexpensive in these times of declining tax revenues, a large budget deficit, and a high rate of debt. According to a CBN study, producing banknotes cost a total of N58,618.50 million in 2020. This sum represents the cost of printing banknotes with the current design. Now, consider the logistics and cost of manufacturing banknotes with a redesign. Thus, we need a prudence and relevance test to demonstrate that this is an efficient and successful policy using defensible and verifiable measures.

 

CHAPTER ONE

BACKGROUND TO THE STUDY

As part of the effort to provide an enabling environment that is conducive to the growth and development of industries, inflow of foreign direct investment (FDI), and stimulate the expansion of domestic production capacity; the Federal Government of Nigeria has developed packages of incentives for various sectors of the economy. These incentives, is hoped, will help revive the economy, accelerate growth and development and reduce poverty.These incentives, generally referred to as tax incentives is defined by the UNCTAD((

[1]United Nations Conference on Trade and Development. It is a permanent intergovernmental body established by the United Nations General Assembly in 1964 to aid the expansion of trade globally.

)), as “any measurable advantages accorded to specific enterprises or categories of business by (or at the direction of) a Government, in order to encourage them to behave in a certain manner”. Other scholars((Steven .C and Ana C.(2007), Tax Incentives For Investment- A Global Perspective: experiences)) have described tax incentives as “any incentives that reduces the tax burden of enterprises in order to induce them to invest in a particular project or sector of the economy”.Ifuek((Ifueko .O.O. (2009), Tax Incentives for Foreign Investors in Nigeria. The Nigerian Investor)) describes tax incentives as “a special arrangement in tax laws to: stimulate growth in specific areas, attract, retain or increase investment in a particular sector, assist companies or individuals carrying on identified activities”. They include measures specifically designed either to increase the rate of return of a particular sector, or to reduce (or redistribute) its cost or risks. Tax incentives are expected to attract more investments, which would ultimately translate to higher future production in the economy. Much as the impact of tax incentives on productivity, employment, and economic growth has been examined extensively; evaluation of the impact of tax incentives on economic growth and development is still relatively limited in literature((Ohaka, J. (2011). Tax Incentives and Financial Performance of Quoted Manufacturing Companies in Nigeria. Unpublished Ph.D Thesis, Department of Accounting, University of Port Harcourt, Choba, Rivers State, Nigeria.)).

Tax studies have become increasingly sophisticated especially during the past decade and have yielded conflicting results as regards the tax matter. Some studies focus on the cost and benefit of tax incentives while a few look at whether public funds could have been better spent or if tax incentives were economically justified. Tax studies offer little guidance to policy makers who are concerned about tax rates or tax offerings and the effectiveness of employing tax incentives as an economic and developmental tool((Mohammed, U.,A. (2012, February 18), Tax Incentive an Economic and Industrial Bail Out. Business Times, p. 4.)). The mode by which economic growth and development can be effectively, efficiently, stimulated and developed is very demanding. As a result of this, the government charges less tax and gives tax holidays in order to encourage investments and economic activities in those areas which help to improve production capabilities, activate economic growth as well as the allocation of resources in a socially desirable manner.  Investors often emphasize on the relative importance of a good tax system in investment decisions compared with other considerations such as political and economic stability, availability of social infrastructure, security of the life and property and also the general cost of doing business and so on. To the prospective investor, the general feature of a tax system (tax base rate) is more important than the tax incentives in many developing countries((Regan, L.,E. (2008). Tax Incentives in Developing Countries.A Reading on Taxation in Developing Countries.3rd Edition. London: Chassel Press)).  The tax laws are not clearly written and may be subject to different interpretation which makes long-term planning difficult for businesses and add to the perceived risks of undertaking major capital intensive projects.

 

Tax incentive itself, is the use of government spending and tax policies to influence the level of national income. This measure encourages the springing up and gradual growth of new enterprises by the reduction of profit tax, which in turn encourages production, influences the production level and curbs unemployment. So, the government should provide such tax incentives in order to boost development which will bring about an increase in employment opportunities and also cause an improvement in the economy. A tax expert((Amadiegwu, N.,O. (2008). Taxation an Indispensable Tool for Economic Development.Enugu: Aries Publication)) wrote that the objective of tax incentive is that by borrowing rather than taxing, the government has a better chance of expanding investment spending which is essential in enlarging production possibilities and attaining a sustainable improvement in the standard of living of the people. A couple of tax experts in Nigeria have stated that these incentives can be targeted on the low income earners, local and developing industries, farmers, which will increase their savings and is necessary for higher investment. It has been posited that tax incentives helps create employment opportunities for the people, helps to fight economic depression and inflation thereby increasing the equitable distribution of income and wealth hence enhancing competitive advantage.

TABLE OF CONTENTS

 

Title page

Certification page

Dedication

Acknowledgment

Abstract

 

CHAPTER ONE: GENERAL INTRODUCTION

• Background to the study
• Statement of the problem
• Operational definition of terms
• Scope and definition of terms
• Research questions
• Theoretical framework
• Literature review

1.8       Discussion of literature

 

CHAPTER TWO: OVERVIEW OF TAX INCENTIVES IN NIGERIA

2.1       Definition of the Concept of Taxation and Tax Incentives

2.2       Tax Incentives as a Tool for Economic Growth and Development

2.3       Classification of Tax Incentives

 

CHAPTER THREE: LEGAL AND REGULATORY FRAMEWORK FOR TAX INCENTIVES IN NIGERIA

3.0       Tax incentives under the Various Tax Laws in Nigeria

3.1       Pioneer Status Incentive

3.2       Tax Incentives and Foreign Direct Investment

3.3       Tax Exemptions and Incentives

3.4       Incentives under the Companies Income Tax Act

3.5       Incentives under the Capital Gains Act

3.6       Incentives under Value Added Tax Act

3.8       Incentives for companies in the Petroleum Industry

3.9       Tax Incentives under the Tax Free Zones and Export Processing Zones

3.10     Nigeria Double Tax TreatyIncentives under the Personal Income Tax Act

 

CHAPTER FOUR: IMPACT OF TAX INCENTIVES ON ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA

4.1       Harnessing tax incentives to achieve economic growth and development – Lessons for companies and individuals

4.2       Advantages and disadvantages of widely used tax incentive instruments and the economics of harmful tax competition.

4.3       Deficiencies in the legal, administrative and regulatory framework for the implementation of tax incentives in Nigeria

4.3       Lessons from other jurisdiction on the framework and implementation of tax incentives

 

CHAPTER FIVE

5.1       Conclusion

5.2       Recommendation

THE EFFECT OF MONETARY POLICY ON THE FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

ABSTRACT

 

This research examined the effect of Monetary Policy on the financial performance of Deposit Money Banks in Nigeria. Specifically, the study establishes the effect of Central Bank Rate (CBR) on the financial performance of Deposit Money Banks, it also establish the effect of Reserve Ratio Requirement on the financial performance of Deposit Money Banks. The methodology used for data collection was mainly from primary source which included questionnaire and personal interview in order to have knowledge of Monetary Policy on the financial performance in UNION BANK PLC. Information was also gathered from the secondary source which includes literature review of previous research, consultation of textbooks and internet. Simple percentage and Chi-square statistical method were used to analyse the data collected before reaching conclusion. The findings of the research indicated that deposit money bank policy affect banking operations in its bid to regulate money supply in the economy with particular reference to deposit and credit creation. The recommendation is that while bank size was found to lead to better financial performance, it is important that banks understand the source of its funds and the costs associated with the funds.

CHAPTER ONE

 

Introduction

 

The financial sector is mainly significant to formal activities that are relevant to the economic activities in Nigeria. This has made it mandatory for monetary policy instruments to become crucial in driving the activities of the Nigeria economy. It has therefore been well observed in Nigeria as well as all other developing countries that prudent monetary policies are the key stone to effective regulations as well as supervision for the growth of any country’s banking Industry. By effective manipulation of monetary instruments, the growth rate in the supply of money can be influenced by the Central bank in many ways, namely, availability of credit interest rate level and availability of liquidity from the banking sector. All these can affect the investment, production, consumption of individual as well as government spending. Omankhanlen (2014).

Business cycle evenness, financial crisis prevention, rate of interest stabilization in the long run, the rate of exchange in real terms has recently been identified as objectives supplementary to monetary policies due to global financial crisis weaving which overwhelmed both emerging and developed economies of the world (Mishra and Pradhan, 2013). Nigerian banks generally believe that there is great risk in lending to the manufacturing and agricultural sectors of the economy, hence, their apathy in giving credit to these sectors of the economy, though these sectors hold the key to the development of the economy especially in employment and foreign exchange generation.

A solid and stable financial sector is essential to make a well-functioning national economy and ensure balance liquidity within the economy. Appropriate liquidity management is essential to foster economic growth. Though, to achieve economic stability proper uses of fiscal and monetary policies are required. Despite establishing regulatory agencies and monetary policy

 

committees, Nigerian banks have actually been deterred in creating adequate liquidity and additional credit for the sustenance of the entire economy.

The Central Bank of Nigeria (CBN) over the years, have instituted various monetary policies to regulate and develop the financial system in order to achieve major macroeconomic objectives which often conflict and result to distortion in the economy. Although, some monetary policy tools like cash reserve and capital requirements have been used to buffer the liquidity creation process of deposit money banks through deposit base and credit facilities to the public.

Monetary policy remains a critical tool in stimulating the growth and stability of financial institution in most developing economics. In Nigeria, the objectives usually include promoting monetary stability. Strengthening the external sector performance and generating a sound financial system that will support increased output and employment. Monetary policy is a major economic stabilization weapon which involves measures designed to regulate and control the volume, cost, availability and direction of money and credit in an economy to achieve some specific macro-economic policy objectives (Ndugbu and Okere, 2015).

Monetary policy according to Anyanwu (2009) involves a deliberate effort by the monetary authorities (the Central Bank of Nigeria) to control the money supply and credit conditions for the purpose of achieving certain broad economic objectives.

Central bank also determines certain targets on monetary variables. Although, some objectives are consistent with each other’s, others are not, for example, the objectives of price stability often conflicts with the objectives of interest rate stability and high short run employment. The role of the banking industry in development process cannot be over-emphasized as they play so many functions. The most important banking industry in Nigeria is the deposit money banks. In order to make profit, deposit money banks invest customer deposits in various short term and long

 

term investment outlet, however core of such deposits are used for loans. Hence, the more loans and advances they extend to borrowers, the more the profit they make (Solomon, 2012). Prior to 1986 direct monetary instruments such as selective credit controls administered interest and exchange rates, credit ceilings, cash reserve requirements and special deposits to regulate the banking system were employed. The fixing of interest rates at relatively low levels was done mainly to promote investment and growth. Occasionally, special deposits were imposed to reduce the amount of excess reserves and credit creating capacity of the banks.

Background of the Study

 

The banking sector is largely dominated by commercial banks and by far the most important in any developing countries like Nigeria. Globally, the unique role of banks as the engine of growth in any economy has been widely acknowledged (Adegbaju and Olokojo, 2013; Kolapo, Ayeni and Oke, 2017; Mohammed, 2017). In fact, the intermediation role of banks can be said to be a catalyst for economic growth and development as investment funds are mobilized from the surplus units in the economy and made available to the deficit units. In doing this, banks provide and array of financial services to their customers. It can therefore be said that the effective and efficient performance of the banking industry is an important foundation for the financial stability of any nation. The extent to which banks extend credit to the public for productive activities accelerates the pace of a nation’s economic growth as well as the long-term sustainability of the banking industry (Kolapo, Ayeni, and Oke, 2017; Mohammed, 2017). Similarly put, the banking institution occupies a vital position in the stability of the nation’s economy, it plays essential roles on fund mobilization, credit allocation, payment and settlement system as well as monetary policy implementation (Mohammed 2017). In performing these functions, it must be emphasized that banks in turn promote their own performance. In other

 

words, deposit money banks usually mobilize savings and extend loans and advances to their numerous customers bearing in mind, the three principles guiding their operations, which are profitability, liquidity and safety (Okoye and Eze, 2013). In Nigeria, Imala (2010) stated that the main objective of the banking system are to ensure price stability and facilitate rapid economic development through their intermediation role of mobilization savings and inculcating banking habit at the household and micro enterprise levels.

The commercial banks do add to or subtract from the stock of money available to the economy and they are also used as instrument through which the Central bank of Nigeria (CBN) perform one of its principal function of formulating and executive system and a stable economic growth. The Central Bank of Nigeria (CBN) carries out this responsibility on behalf of the government of Nigeria through a process outlined in the Central Bank of Nigeria Decree 24 1991. In formulating and executing monetary policy, the Central Bank of Nigeria governor is required to make proposals of the president of the Federal Republic of Nigeria who has the power to accept or amend such proposals, this implementing the approval monetary policy. The Central Bank of Nigeria directs to banks and other financial institutions to carry out certain duties in pursuit of approval monetary policy guidelines and circular, operational within a fiscal year but could be amended in the course of the year. Penalties are normally prescribed for non-compliance with specific provision of the guideline (CBN Briefs, Series no 95/03).

As a monitory device, the Central Bank of Nigeria conducts periodic and special examinations of the books of specified licensed financial institutional which is also required to submit regular returns on their operations to the Central Bank of Nigeria. In the Nigeria socio economic setting, several monetary policy measures led emerged for arresting the dynamic economic system of the country. The Central Bank of Nigeria at period attempts to keep the money supply growing at an

 

appropriate to ensure sustainable growth as well as domestic and eternal stability and using the discretionary control of money stock by expansion or contraction of money, influencing interest rate to make money cheaper or more expensive depending on the prevailing economic conditions and trust of policy.

Oloyede (2013), the monetary authorities usually rely on the manipulation of monetary policy for the purpose of credit control budgeting discipline, price stability, economic growth, full employment and balance of payment equilibrium. The techniques by which the monetary authority tries to achieve then aims through the implementation of monetary policy measures must have certainly impacted positively or otherwise on the performance of commercial banks in Nigeria, amongst other financial institution. The level and structure of interest rate, money supply and growth of the banking sector competitiveness and liquidity management are some of the elements that fall under the impact analysis in this research study. This research work intends to identify the monetary policy measures used by the Central Bank of Nigeria, their efficacies and impact on the performance of banks in Nigeria.

In the past decade, significant changes in the design and conduct of monetary policy have occurred around the world. Many developing countries include: Nigeria have adopted various policy measures to achieve targeted objectives. The monetary policy is essential to achieve desired objectives which traditionally includes promoting economic growth, achieving full employment level, reduction in the level of inflation, maintenance of healthy balance of payment, sustenance of growth in the economy, increase in industrialize and economic stability. The smoothing of the business cycle, preventing financial crisis and stabilizing long term interest rate and the real exchange late have been identified recently as other supplementary objectives of monetary policy because of the weaving global financial crisis which engulfed major

 

development and emerging economic in the world (Mishra and Pradhan, 2013). For most economies the objectives of monetary policy includes price stability, maintenance of balance of payments equilibrium, promotion of employment and output growth sustainable development. These objectives are necessary for the attainment of internal and external balance, and the pranstion of long run economic growth. The importance of price stability derived from the harmful effect of price volatility which undermines the objectives. This is indeed a general consensus that domestic price fluctuation undermines the role of monetary values as a store value and frustrates investment and growth.

Generally, the primary objectives of monetary policy are concerned with the application of expansionary monetary policy measures during economic recession and contractionary. Monetary policy controls money supply because it is believed that its rate of growth has an effect of inflation. The basic aim of monetary policies is not to aggregate them but to aggregate the real sectors of the economy such as level of capital price stabilization and economic development. Policies are designed in order to change the trend of some monetary variable in particular direction so as to include the desired behavioral change in the monetary policy. The Central Bank’s role is to conduct appropriate monetary policy that is consistent with the main economic objective that will help the growth of gross domestic product (GDP) sustainable inflation and stable balance of payment position. This is done by putting in place the direct or indirect monetary approach so as to control monetary trends.

Statement of the Problem

 

Monetary policy is one of the principal economic management tools that governments use to shape economic performance. Measured against fiscal policy, monetary policy is said to be quicker at resolving economic shocks. Monetary policy objectives are concerned with the

 

management of multiple monetary targets among them price stability, promotion of growth, achieving full employment, smoothing the business cycle, preventing financial crises, stabilizing long-term interest rates and the real exchange rate. Experience shows that emphasis is usually placed on maintaining price stability or ensuring low inflation rates.

The Central Bank of Nigeria is responsible for the recommendation and implementation of monetary policy tools in Nigeria. The CBN recommends the CRR, CBR and Treasury bill rates. Those tools are implemented through deposit money banks and they are aimed at stabilizing the price levels in the economy. The use of cash reserve ratio affects the level of liquidity in the deposit money banks. When commercial banks are faced with limited liquidity, they turn to other deposit money banks for inter-bank borrowing. Those funds are borrowed at the CBR and it is usually very high, which affects the interest expense for the borrowing bank and the interest income for the lending bank. The other way to increase liquidity in the bank will be to borrow by floating a debt instrument. The rate offered for the debt instrument is also tied to the treasury bills or treasury bonds issued by the government through the Central Bank. These effects of the monetary tools are expected to have an effect on the financial performance of deposit money banks.

Several research studies have been done in relation to Deposit Money Banks in Nigeria: Gitonga (2015) studied the relationship between interest rate risk management and profitability of deposit money banks in Nigeria; Kimoro (2015) did a survey of the foreign exchange reserves risk management strategies adopted by the Central Bank of Nigeria and Mbotu (2015) did a study on the impact of the Central Bank of Nigeria rate (CBR) on deposit money banks’ benchmark lending interest rates. Ongore and Kusa (2013) study examined the effects of bank specific factors and macroeconomic factors on the performance of deposit money banks in Nigeria during

 

the period from 2001 to 2010. Kiganda (2014) carried out a study on effect of macroeconomic factors on the profitability of deposit money banks in Nigeria with a focus on Union Bank.

This study has identified a gap in the current literature and research with respect to monetary policy and its effect on financial performance of deposit money banks. The literature reveals that while there is much effort by the government to influence the money supply by instituting various policy tools, an analysis on the effects of those tools on deposit money banks’ financial performance, which are the most used channel of transmission of the policies, is inconclusive. This study will therefore be motivated to fill the knowledge gap on effects of the various monetary policy tools on financial performance of deposit money banks in Nigeria with firm size as the control variable.

Objectives of the study

 

The general objective of the study is to determine the effect of monetary policy on the financial performance of Deposit Money Banks in Nigeria.

The specific objectives are as follows:

 

1. To establish the effect of Central Bank Rate (CBR) on the financial performance of Deposit Money
2. To establish the effect of Reserve Ratio Requirement on the financial performance of Deposit Money

Research Question

 

1. Does Central Bank Rate (CBR) has effect on the financial performance of Deposit Money Banks?
2. Does Reserve Ratio Requirement has effect on the financial performance of Deposit Money Banks?

 

Statement of Hypothesis

 

H0:      There is no significant relationship between monetary policy and financial performance of Deposit Money Banks in Nigeria.

H1:      There is significant relationship between monetary policy and financial performance of Deposit Money Banks in Nigeria.

Significance of the Study

 

The study helps us understand the impact of an effective monetary policy regime on the performance of the Deposit Money Banks. It would aid the regulators to carefully plan and forecast the effects of its policies to meet its objectives of economic growth and full employment. To bankers, it would expose the relationship existing between our relevant variables, which will be of interest to them in their respective banks. This would also benefit the academic community which would avail them the opportunity of conducting further research in the topic of similar areas.

The study is expected to contribute to the existing literature in the field of monetary policies. Future scholars can use this research as a basis for further research in the area of monetary policy theories.

The study will also enlighten management teams of commercial bank on the short-term and long- term effects of the monetary policy implementations by the Central Bank. This will greatly help them in designing the risk management measures to employ given anticipated changes in monetary policies.

Justification of the Study

 

The outcome of this study will be a little guide for the deposit money banks on how to overcome the effect of monetary policy on their financial performance in Nigeria.

 

The research will also serve as a source base to other scholars and researchers interested in carrying out further research in this field in future. The study therefore will extend the frontiers of the existing literature by emphasizing the effect of monetary policy on the financial performance of deposit money bank in Nigeria.

Scope of the Study

 

The scope of this research work is to examine the effects of monetary policy on the financial performance of deposit money bank in Nigeria. In which Union Bank Plc. was use as a case study. However, the research was limited to Union Bank Plc in Ibadan metropolis due to the schedule of researcher

Definition of Terms

 

• Financial Performance

 

Financial Performance analysis refers to analytical tools to measure the strength and weakness of a firm in relation to its balance sheet and profit and loss statement. Examples of bank financial performance tools and ratios include operating income, earnings before interest and taxes, Total Asset value. Financial performance analysis is carried out to ascertain the profitability position and performance of a firm. It can be conducted by management, owners, creditors, investors as demonstrated by Chenn (2011).

TABLE OF CONTENTS

 

CHAPTER ONE: INTRODUCTION

• Introduction 1
• Background to the study 3
• Statement of the problem 6
• Objectives of the study 8
• Research questions 8
• Statement of hypothesis 9
• Significance of the study 9
• Justification of the study 9
• Scope of the study 10
• Definitions of terms 10

CHAPTER TWO: LITERATURE REVIEW

• Introduction 13
• Conceptual Framework 13
• Theoretical Framework 32
• Literature on Subject Matter 37

CHAPTER THREE: RESEARCH METHODOLOGY

• Area of Study 41
• Research Design and Sources of Data 41
• Study Population and Determination of Sample Size 43
• Instrumentation 43
• Procedure for Data Collection and Data Analysis 44
• Limitation of the Study 45

CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION

• Introduction 46
• Data Analysis and Findings 46
• Test of hypothesis 58
• Discussion of findings 58

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

• Summary 60
• Conclusion 60
• Recommendations 62
• Suggestions for Further Research 63
• References       64

A STUDY ON THE UNIT COST OF EDUCATION ON STUDENTS ENROLMENT RATES IN PUBLIC SECONDARY SCHOOLS IN NIGEIA

CHAPTER ONE INTRODUCTION

Background to the Study

 

The economics of education asserts that investment in education has a long gestation period before its returns are received by investors (Mingat and Tan, 1996, Manda, Mwabu and Kimenyi, 2002 and Gropello, 2006). It is against this background that education is viewed as the root source of human, social, cultural, and economic progress. Education is also perceived as legitimate determinant of well-being in terms of both individual and collective goods, resulting into rapid growth at both national and global levels (Meyer, Ramirez, Frank, and Schofer, 2005).

 

Since education is viewed as an investment, governments of various countries, societies and individuals have been concerned with how to finance it. The process of education financing has been dogged with complexities because it is done at pre-school level, primary level, secondary level and tertiary level. Scholars have been attempting to come up with methods of establishing the average cost of education per student with the aim of easing the complexities of education financing. For instance, the Organisation for Economic Co-operation and Development, (OECD, 2011) asserted that the average cost of education per student can be calculated by dividing the total expenditure by educational institutions at that level by the corresponding full-time equivalent enrolment. This is in line with Delmonico (2001) who also calculated the average cost of education per student by dividing public spending on education by the number of students,

 

 

expressing the number as a percentage of GNP per capita. The same formula was applied by United Nations Educational, Scientific and Cultural Organization (UNESCO 2011) to calculate the average cost of education per student in Sub- Saharan countries including Kenya. However, the UNESCO (2011) formula was applied in calculating the average cost of education per student in primary schools and excluded other levels of education like secondary school as well as the private cost of education.

 

On the private cost, Mikiko, Takashi and Yuichi (2005), calculated the average cost of education per student for children in Uganda by focusing on what the household spends on education. This method also avoided inclusion of the government expenditure in calculating the average cost of education per student.

In Nigeria , the cost of education is met by the government and household members.