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The Economics of an African University

Published online by Cambridge University Press:  11 November 2008

E. M. Godfrey
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Extract

THE case for taking a careful look at educational expenditure in African countries rests simply on its size, in relation to government expenditure as a whole and to national income. As Table I (overleaf) shows, most African governments devote a considerably higher proportion of their total spending to education than does, for instance, the British Government.

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Articles
Information
The Journal of Modern African Studies , Volume 4 , Issue 4 , December 1966 , pp. 435 - 455
Copyright
Copyright © Cambridge University Press 1966

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References

Page 435 note 1 Lewis, W. A., ‘Education and Economic Development’, in Social and Economic Studies (Kingston), 06 1961.Google Scholar

Page 435 note 2 Lewis, W. A., ‘On Assessing a Development Plan’, in The Economic Bulletin of Ghana (Accra), 06–07 1959.Google Scholar

Page 436 note 1 Source: U.N. Statistical Yearbook (New York)Google Scholar, and Yearbook of National Accounts Statistics (New York).Google Scholar

Page 436 note 2 At market prices.

Page 436 note 3 Federal and Regional Governments' expenditure.

Page 436 note 4 4 years earlier.

Page 436 note 5 Million C.F.A. francs.

Page 436 note 6 Mellanby, K., The Birth of Nigeria's University (London, 1958).Google Scholar

Page 437 note 1 Sources: UNESCO, The Development of Higher Education in Africa (Paris, 1963)Google Scholar; Robbins, Report on Higher Education (H.M.S.O., London, 1963).Google Scholar

Page 437 note 2 Arts.

Page 437 note 3 Science and Medicine.

Page 437 note 4 Capital costs per head in the French-speaking universities represented in Table 2 are considerably lower than those in the others. The remarks that follow should be regarded as applying primarily to universities in Commonwealth African countries.

Page 438 note 1 Sources: University of Ibadan, , Audited Accounts, and Ibadan, XVIII, 02 1964Google Scholar; also Annual Reports and Calendars. The figures for Arts, Science, and Medicine for the years 1950–1951 to 1952–1953 inclusive are estimates. All the subject figures exclude postgraduate research students. Economics was included in Arts before 1959–1960.

Page 438 note 2 Expenditure figures are for the financial year ending 30 June; student enrolment figures are for the academic year commencing October.

Page 439 note 1 Sources: University of Ibadan, , Audited Accounts, and Ibadan, XVIII, 02 1964Google Scholar; also Annual Reports and Calendars.

Page 439 note 2 The tendency would be even more striking if the figures in Tables 3 and 4 were at constant prices.

Page 441 note 1 An explanation of some of the terms used here may be useful to the general reader. Opportunity cost is the term used by economists to express cost in terms of forgone alternatives. For instance, if a packet of cigarettes costs 4s. and a bottle of beer 2s. the opportunity cost to an individual of a packet of cigarettes is two bottles of beer. Thus the social opportunity cost of building a university would be what society has to give up in order to do it. In evaluating an economic development project, there are two reasons why it may be misleading to use the market price of an input as a measure of its social opportunity cost: (i) Market prices may not reflect current scarcities—i.e. there may be fundamental disequilibrium in certain markets (examples are given in the text); or (u) if the project is a large one it may itself affect the value of inputs. Therefore accounting prices are often used for this purpose. Where the aim is to maximisc the ratio of the present value of benefits to the present value of costs, the accounting price of a resource would be defined as equal to its marginal social opportunity cost.

Page 442 note 1 See Becker, G. S., Human Capital (New York, 1964).Google Scholar

Page 442 note 2 See Blaug, M., ‘The Rate of Return on Investment in Education in Great Britain’, in The Manchester School (Manchester), 09 1965Google Scholar; and Rado, E. R., ‘Manpower, Education and Economic Growth”, in The Journal of Modern African Studies (Cambridge), IV, I, 1966.Google Scholar

Page 442 note 3 E.g. Balogh, T. and Streeten, P., ‘The Coefficient of Ignorance’, in Bulletin of the Oxford University Institute of Statistics (Oxford), 05 1963.Google Scholar

Page 443 note 1 U.N., Manual on Economic Development Projects (New York, 1958)Google Scholar. To derive a unique, consistent set of accounting prices it would be necessary to construct and solve a programming model of the economy as a whole. In practice, accounting prices and indirect effects may have to be estimated in an ad hoc way. Intelligent adjustments based on guesswork may be preferable to leaving market prices alone. Probably the best way to bring accounting prices into the analysis, as has already been suggested, would be to make several calculations of cost and benefit on varying assumptions about the divergence between market prices and accounting prices of inputs and outputs.

Page 443 note 2 Investment in Education (Lagos, 1960).Google Scholar

Page 444 note 1 For more detailed criticisms of this approach, see Rado, op. cit.; Rado, E. R. and Jolly, R., ‘The Demand for Manpower—an East African case-study’, in The Journal of Development Studies (London), 04 1965Google Scholar; Cash, W. C., ‘A Critique of Manpower Planning in Africa’, in Economic Development and Cultural Change (Chicago), 10 1965Google Scholar; and Blaug, M., ‘An Economic Interpretation of the Private Demand for Education’, in Economica (London), 05 1966.Google Scholar

Page 444 note 2 Niculescu, B. M., ‘Some Economic Implications of Higher Education in Ghana’, in The Economic Bulletin of Ghana, 10–12 1960.Google Scholar

Page 445 note 1 To get the private sector to respond in the required way, a tax per high-level employee equivalent to the cost of training would need to be imposed. The idea here would be to reduce the gap between the Cost to the employer and the social opportunity cost.

Page 445 note 2 A similar suggestion has been made by Okigbo, P. N. C., ‘Criteria for Public Expenditure on Education’, in Robinson, E. A. G. and Vaizey, J. E. (eds.), The Economics of Education (London, 1966), ch. 17.Google Scholar

Page 445 note 3 Blaug, op. cit. in The Manchester School.

Page 446 note 1 Some of these problems are considered in the UNESCO 1963 conference report on The Development of Higher Education in Afrika.

Page 446 note 2 See, for example, Callaway, A., ‘Unemployment Among African School-leavers’, in The Journal of Modern African Studies I, 3, 1963Google Scholar; Yesufu, T. M., ‘Nigerian Manpower Problems—a preliminary assessment’, in Nigerian Journal of Economic and Social Studies (Ibadan), 11 1962Google Scholar; and H. M. A. Onitiri, ‘A Proposal for Nigerian Rural Development’, ibid. March 1966.

Page 447 note 1 Source: University of Ibadan, Audited Accounts. The period 1948–1949 covers 15 months from I April 1948. The figures for Arts, Science, and Medicine for the financial years 1949–1950 to 1952–1953 inclusive are estimates.

Page 448 note 1 Sources: University of Ibadan, , Audited Accounts, and ibadan, XVIII, 02 1964Google Scholar; also Annual Reports and Calendars.

Page 448 note 2 The Extra-mural Department does in fact prepare some external students for a London degree; but, because of its other functions, it is probably best treated separately.

Page 449 note 1 Source: University of Ibadan, Audited Accounts.

Page 449 note 2 Lack of data has precluded adjustments for indirect taxes and subsidies. The former should strictly be cut out, the latter added, to give a truer reflection of the opportunity cost of both current and capital expenditure.

Page 450 note 1 Source: University of Ibadan, Audited Accounts.

Page 450 note 2 Cf. estimates by Pyatt, G., ‘Capital, Output and Employment’ (Cambridge, Department of Applied Economics)Google Scholar; Barna, T., ‘The Replacement Cost of Fixed Assets in British Manufacturing Industry in 1955’, in Journal of the Royal Statistical Society (London), series A, CXXIII, I, 1957Google Scholar; P. Redfern, ‘Net Investment in Fixed Assets in the U.K., 1938–1953’, ibid. series A, CXVIII, 2, 1955. Some have suggested that buildings and equipment may have a shorter life in tropical conditions, but the high expenditure on maintenance (see above) and the slower rate of obsolescence are likely to offset the effects of the climate.

Page 451 note 1 It is arguable that the planners chose too low a rate of interest, although Okigbo (op. cit.) advocates the use of the long-term rate on government bonds for this purpose. At any rate various rates can be experimented with. It may even be felt that that part of the capital that comes from abroad in the form of grants has zero opportunity cost to the Nigerian economy, in which case a zero interest rate for that part of the capital could be used.

Page 451 note 2 I.e. the total annual cost to society, at constant prices, of the teaching activities of the University of Ibadan, all other costs having been eliminated. Source: Audited Accounts, Annual Reports, and Calendars.

Page 452 note 1 The following formula is used to convert capital expenditure into equivalent annual cost:

where R is equivalent annual cost, P is initial investment, L is amount recovered at end of period, n is estimated lifetime, and r is discount rate (social opportunity cost of capital).

Page 453 note 1 Nigeria Union of Great Britain and Ireland, ‘Memorandum on Student Awards and Survey of Income and Essential Expenditure’, presented by J. A. o. Olopade, August 1964. The basis of its sampling procedure is not clear but is probably far from scientific.

Page 454 note 1 To be precise, looking at the local university first, cost per graduate can be defined in the following way:

where C is average cost per student per annum, g is number of graduates in year t, Cg is cost per graduate in year t; u, v… nare groups of graduates in year t classified according to number of years spent at university, and s', w'… n' are groups of unsuccessful leavers in year classified according to number of years spent at university. For students abroad, what is needed is an estimate not of cost per graduate in year t, but of cost per graduate returned to Nigeria in year t; To make this calculation simpler, the assumption is made that a student abroad ceases to be a significant cost to the Nigerian economy as soon as he ceases to be a student, even if he remains abroad—on the principle that he is unlikely to receive further net remittances from home (and may even become a net remitter, thus offsetting the excess of production forgone over maintenance cost avoided). The cost per returned graduate can be precisely defined as follows:

whereg' is number of graduates returned home in year t, c' is average cost per student abroad, K is average outward travel costs (including dependants), K' is average homeward travel costs (including dependents), is proportion of travel costs borne by the Nigerian economy, Cg' is cost per graduate returned home in year 1, a… n are groups of graduates returned home in year classified according to the periods over which they have been a cost to the Nigerian economy, and a'… n' are groups of unsuccessful students returned home in year t, classified according to the periods over which they have been a cost to the Nigerian economy.

Page 455 note 1 Especially if foreign exchange were given a high accounting price.