Funding education is capital intensive and profits are often not expected in the first decade of an educational institutions existence, making it necessary to explore novel models of funding such as long-term private equity investment. For instance the average wage bill of a medium-sized private university per annum is about N500 million.
Setting up a well-equipped electronic engineering department costs about N80 million and profit is strictly a game of numbers. It takes at least a decade to have the number of students needed to break even. Moves by private equity firms in Angola and Ghana are pointing to ways of dealing with these funding challenges.
On Monday, no fewer than 38 universities across the country increased their tuition fees as a result of poor funding by the Federal and State governments. Deji Omole, chairman of the Academic Staff Union of Universities (ASUU), University of Ibadan Chapter, made this known in a statement made available to journalists in Abuja on Monday.
ASUU also noted that it would be difficult for any Nigeria university to effectively compete globally with the inadequate allocation of budgetary funding as prescribed by the United Nations Educational, Scientific and Cultural Organisation (UNESCO) to fund education. The new education funding model in Angola and Ghana involving private equity firms might help Nigeria out of its education funding gap, improve accountability and increase transparency in resource allocation as monthly revenue from oil rents diminish.
AfricInvest, a US$1 billion asset, mid-market private equity firm recently backed International Community School, a private school in Ghana, in a preferential share deal recently. The investment is the sixth for AfricInvest’s third private equity fund, which is now 50 per cent deployed. The capital will be used to upgrade the school’s facilities and help support its expansion plans within Ghana as well as the broader West African region.
Similarly, ABO Capital, an Angolan investment firm has acquired Complexo Escolar Privado Internacional in Luanda, Angola’s capital city reinforcing. Terms of the deal for the 768-pupil facility remain undisclosed. Also known as the Turkish School, CEPI started life in 2007 and enrolment has expanded consistently, reaching 768 pupils in the current academic year. This is a model that could help bridge the funding gap in Nigeria. Africa’s most populous nation’s average annual budgetary allocation to education in the last four years was N472 billion out of an average annual budget of N5.05 trillion, which represents an average of 9.36 per cent resulting in a funding gap of 16.64 per cent, representing N840 billion, according to UNESCO benchmark of 26 per cent of national budget. “Government simply can’t to fund education effectively without private sector involvement. In fact, the new model we are evolving, particularly for vocational education in Lagos is largely private sector driven” said Obafela BankOlemoh, special adviser to the Lagos state governor on education, during a recent education convention. In the face dwindling revenue from crude oil exports, which fell from an all-time high of $114 per barrel in 2014 to an average of $45 per barrel in 2016 with possibility of further dips given increased production from the United States of America’s shale oil producers, Nigeria’s government is hard pressed to find alternative models of funding to keep its education system globally competitive. (BusinessDay)