Nigeria: Selected Issues

International Monetary Fund. African Dept.

doi:10.5089/9781498306225.002.A005

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Nigeria: Selected Issues

Author: International Monetary Fund. African Dept.

Publication Date:: 01 Apr 2019

eISBN:: 9781498306225

Language:: English

Keywords:: ISCR; CR; firm; cost; debt; D. government initiative; priority spending; health outcome; policy option; education outcome; Human capital; Gender inequality; Women; work force's productivity

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Selected Issues

Abstract

Selected Issues

Human Capital and Gender Equality¹

Education and health outcomes in Nigeria are among the weakest worldwide and are deteriorating in some parts of the country. Access to education is highly unequal across states and individuals’ income and gender. Regional differences in health outcomes are vast. Estimations from a micro-founded general equilibrium model suggest that narrowing gaps in education between boys and girls and between individuals at different parts of the income distribution would boost productivity, decrease income inequality, and narrow gender gaps in labor force participation rates and earnings. Closing the gender gap in years of schooling in each income quintile alone would boost long-term GDP by 5 percent, with much higher effects for more ambitious scenarios that also include anti-discrimination policies. Improving health outcomes, in particular for children, will support education outcomes and boost productivity of the labor force. Increased and regular funding for the education and health sector will be critical for supporting a range of reforms that includes all tiers of government.

A. Introduction

1. Building human capital to boost the work force’s productivity will be essential to reap Nigeria’s demographic dividend. Nigeria’s population is growing at more than 2½ percent annually and its youth accounts for more than half of the population. This presents tremendous opportunities. However, a larger population will also add pressure on public services and infrastructure, which are already under considerable strain, with Nigeria already hosting the largest number of out-of-school children worldwide and contributing 12 percent to the global under-five mortality. Experiences from other countries suggest that declining dependency ratios (increasing the ratio of the population of working age to those too young or too old to be in the labor market), provide an opportunity for a demographic dividend. To reap this dividend, however, investments in human capital need to increase to allow workers to enter into the labor market at higher wages and higher productivity employment (CR/18/64).

2. In this context, this paper provides an overview of developments in health and education in Nigeria and their implications for the macroeconomy and offers policy options. In particular, it first provides an overview of the state of human capital and access to health and education services in Nigeria and simulates the impact of a range of policies to close gaps in education on GDP, inequality of gender and income, and other labor market outcomes. After giving a summary of ongoing government initiatives, it offers a few policy options.

B. Status Quo

3. Indicators of human capital development in Nigeria paint a worrisome picture. According to the World Bank’s 2018 Human Capital Index, capturing the level and quality of education as well as health outcomes, Nigeria ranks among the bottom six countries worldwide. For the second year in a row, it also ranks last on Oxfam’s Commitment to Reducing Inequality Index, to a large extent driven by the country’s low social spending. Spending on education, at 1.7 percent of GDP, is well below the 4.7 percent average in sub-Saharan Africa.

4. Health outcomes are poor, on average among the worst worldwide, with large variations across states (Figure 3). One in nine children dies before their fifth birthday in Nigeria (Figure 3, panel 1)—750,000 deaths each year—mostly from preventable and treatable causes. Almost one in five children in the poorest income quintile die before the age of five—twice the rate in Ghana and Senegal. About half of children this age suffer from stunting, one in three children suffers from chronic malnutrition. Malnutrition, in turn leads to slower brain and cognitive development, with some estimates implying a loss of two to three years of schooling, weaker school performance, lowered productivity in adulthood, and annual losses of GDP of 11 percent in Asia and Africa. Nigeria has the largest number of unimmunized children worldwide. Its maternal mortality is second highest globally (8 maternal deaths per 1,000 live births).

5. These averages mask wide variations and extreme outcomes in some regions of the country. For instance, every fifth child dies before reaching the age of 5 in Jigawa, Kano and Zamfara state (Figure 3, panel 3). More than half of children suffer from stunting in most North-Western states but also in Yobe in the North East (Figure 3, panel 4). Fewer than 20 percent of children are being immunized in some North-Western states, and full immunization is below 20 percent in Katsina, Kebbi and Zamfara states (Figure 3, panel 5). A woman in the North East is 10 times more likely to die related to childbirth than a woman in the South West.

6. Low spending on health and irregular release of funds complicate the implementation of necessary initiatives. At 0.6 percent of GDP, Nigeria’s health spending is comparable to that in conflict affected countries, such as Afghanistan, the Central African Republic and Yemen, and insufficient to address the sector’s vast challenges. In 2016, health expenditures accounted for only 7.1, 4.2 and 3.8 percent of budgets at the federal, state and local level, respectively. Funds are released irregularly and often with a significant lag, complicating the implementation of projects, and the utilization of funds. In 2016, e.g., only 64 percent of the health capital budget was released and only 54 percent subsequently used. Implementation of the Government’s Second National Strategic Health and Development Plan is estimated to require funding of N4.3 to 7.3 trillion between 2018 and 2022 in different scenarios, a multiple of current spending in the sector (NSHDP II 2019).

7. Quality issues in the education sector are impeding effective accumulation of human capital, and educational attainment varies strongly across states (Figure 4). The average Nigerian spends more than 8 years in school (Figure 4, panel 1) but there are substantial issues in the quality of education, halving the effective level of schooling. For instance, only 24 and 31 percent of teachers are able to score at least 80 percent on a 4th grade test in the language and mathematics curriculum, respectively, and four out of five persons that are 15 to 24 years old are not able to read a full sentence (World Bank 2018).

8. National averages are masking vast differences in educational attainment across states and the impact of conflict poses a major concern. Depending on the state, education can be almost universal (Lagos) or most of kids can be out of school (Bauchi) (Figure 5, panel 3). States’ priority spending varies widely, with just around Naira 5,000 spent per person on education, health and public administration in Katsina and Sokoto, but more than Naira 44,000 in Bayelsa. The Ministry of Education reports that, over the past nine years, almost 2,300 teachers have been killed and 19,000 displaced in Borno, Yobe and Adamawa state, and, since 2014, an estimated 1,500 schools have been destroyed. More than half of children in the Northeast have never attended school.

9. Access to education also varies strongly across individuals’ incomes and gender (Figure 5). Among the 20 percent of the poorest in Nigeria, a child’s probability to be out of school is more than 70 percent; it is 2 percent for the richest quintile (Figure 5, panel 1), contributing to Nigeria’s high number of out-of-school children (a minimum of 10 million children). Literacy rates also vary strongly across income quintiles, with additional large gender gaps: in the bottom quintile, only one in ten women is literate, compared to one in three men. These gender gaps narrow with higher income, and are virtually closed for the richest 20 percent, with average years of education similar for men and women at that level (Figure 5, panels 2 and 3). The probability of completing upper-secondary education is particularly low for poor girls: 1 percent for the bottom quintile and 6 percent for the second quintile (Figure 5, panel 4).

C. Macroeconomic Gains from Equality of Opportunity

10. The above difficulties in health and education without doubt pose large development challenges and have macroeconomic implications. Improving health and education outcomes are development goals in themselves and part of the Sustainable Development Goals. In addition, a healthier and more educated labor force is more productive, yielding significant boosts for output and growth. While estimating the gains from improvements in health outcomes is beyond the scope of this paper, this section aims at providing gains from closing gaps in education based on a number of scenarios.

11. A micro-founded general equilibrium model with heterogenous agents quantifies the gains from narrowing education gaps. The model is part of a new wave of heterogenous agent models built by IMF staff that allow for the analysis of gender-related policies and their impact on macroeconomic outcomes. Simulations of different sets of policies using distinct versions of this framework so far have estimated to boost long-run GDP by 26 percent in Iran (narrowing the wage gap; IMF (2018)), more than 1 and 7 percent of GDP in Argentina (policies to reduce the tax-wedge and addressing reducing discrimination in the formal sector, respectively (IMF 2017)), and more than 8 percent of GDP in Senegal (for a policy that would ensure 5 years of schooling for everybody (IMF 2019)). Depending on the policy, a new steady state with changed policy scenarios with could be interpreted as being achieved within the same generation (when immediately impacting adults) or one generation (in the case of education as children need to grow up to join the labor market).

12. The model is calibrated to match the main features of the Nigerian economy. These features include labor market outcomes (participation, income), the distribution of income, and education (in years of schooling), gender inequality, and the government:

Households live for three periods and consist of husband, wife and children, or only a husband and a wife (when children left home to form their own families). Men always work, only deciding how much labor to supply in the formal and informal sectors. Women can work, and whenever they decide to work the family incurs a cost (related to time spent in home production, including raising children and other household responsibilities traditionally performed by women, and social norms, including attitudes towards working women and the type of jobs women can perform). Children’s future productivity and incomes depend on the amount of human capital accumulated, including education. Their level of education depends on government expenditures on education, households’ income and the child’s gender, calibrated in line with data presented in the last section.
Firms produce formal goods, hire employees, and pay corporate taxes. Informal goods are produced by households.
Labor markets. Women (who work) and men decide how much labor to supply the formal and informal sector. They receive income and, in case they work for the formal sector, they pay labor taxes, mirroring Nigeria’s tax system and information from the latest Living Standards Survey (LSS).
The government provides education, buys formal goods, and taxes households (VAT, income tax) and firms, with a linear cost of providing an additional year of education.

13. Four scenarios give a gradual picture of possible gains from higher education, reaching up to 12 percent of GDP (and higher levels for more ambitious policies not shown here) (Figure 6):

a. Scenario 1: Equalize the number of years of education for boys and girls within the same income percentile. With more girls being educated, the ratio of female-to-male labor force participation rises from 76 percent to 87 percent, and increased productivity raises women’s average hourly wages by more than eight percent. Male average hourly wages remain constant. The long-term level of GDP increases by five percent. With productivity increasing mainly at the lower end of the income distribution (where gender gaps are highest), income inequality, as measured by the Gini coefficient, decreases by two percentage points.
b. Scenario 2: Increase education for both boys and girls, so that each kid benefits from at least the current median years of education for boys. This policy increases the ratio of female-to-male labor force participation to 93 percent as the boost in human capital disproportionately impacts girls. Without additional reforms in the tax system (for additional reforms, see accompanying staff report), government revenues increase only little (0.2 percent of GDP), mainly driven by additional activity of women of middle income in the formal sector, as most women will join the informal sector, not being subject to income or corporate tax. Earnings rise for both women (+10.4 percent) and men (+2.7 percent). GDP increases by almost 8 percent, higher than in scenario 1, as access to education and higher productivity spreads to a wider range of workers. The Gini coefficient decreases by 5 percentage points, as people in the lower half of the income distribution no longer differ in their level of education and gender gaps in education are closed.
c. Scenario 3: After increasing education as in scenario 2, reduce barriers that pose disincentives to women to join the formal and informal labor market. In this scenario, in addition to increasing education levels for boys and girls, the government addresses discrimination in the formal and informal labor sectors. Examples of such policies are, e.g., the implementation of equal pay for equal work rights, equal access to resources (including land and credit), policies that make it easier to balance work and household responsibilities and policies that address social norms and negative attitudes towards working women. In this simulation, average education increases to 9.8 years for girls and to 10.3 years for boys. With higher returns from labor, gender gaps in labor force participation would completely close, and women’s average wages would increase 18.1 percent (+3.2 percent for men). Government revenues would increase marginally (+¼ percent of GDP) through higher incomes in the formal sector. GDP rises by 11.7 percent, on the back of higher productivity, including from removing distortions from the labor market. The Gini coefficient decreases by 6 percentage points as lower income households get more educated and women join the labor market in an environment with less obstacles or discrimination.
d. Scenario 4: An increase in the efficiency education, i.e. increasing the quality-adjusted years of learning at the given years of schooling, by 16 percent (to the level in sub-Saharan African’s lower middle-income countries) boosts GDP by 3.6 percent through higher productivity for all kids. The impact on other outcomes discussed here are smaller, as relative gaps in education remain the same across individuals at different levels of the income and between boys and girls.

D. Government Initiatives

14. This section provides pointers to recent reforms in the education and health sector and policies to address gender inequality. The challenges in the health and education sector, including with respect to gender inequities, and the possible gains of addressing them motivate the question of recent policy initiatives by the government in these areas—a selective description of which is provided in the following.

15. The government has taken a number of recent initiatives to improve health outcomes.

January 2019’s launch of the Second National Strategic Health Development Plan for 2018–22 is welcome and rightly identifies challenges, priorities and financing requirements for the sector. The strategy supports the objectives under the government’s Economic Growth and Recovery Plan which targets to strengthen the availability, accessibility, affordability and quality of health services by expanding healthcare coverage to all local governments, providing sustainable financing for the health sector and reducing infant and maternal mortality rates.
The government has enacted the National Health Act that is operationalized through the Basic Health Care Provision Fund that would provide additional domestic resources for primary healthcare, including through innovative financing mechanisms, such as decentralized facility financing and performance-based financing. The inclusion of the 1 percent commitment into the 2018 and 2019 budgets is also welcome.
The government also ratified the Social Protection Policy and increased the annual allocation to the social investment program to N 500 billion for 2016–2018.
Malaria control has increased the share of children under 5 that use treated nets to 49 percent in 2016 (World Bank 2018). Nigeria is about one year away from eradicating wild polio.

16. There have been several initiatives of varying scale by the government to improve education outcomes. The government has developed and launched a Human Capital Vision document in collaboration with state governments and development partners. A number of targeted programs are ongoing, for instance:

The National Home-Grown School Feeding and Health Program aims at schooling by improving the nutritional and health status of children is now implemented in 26 states. The Federal Ministry of Education reports that more than 95 thousand community cooks in 47 thousand public primary schools are feeding about 9.3 million pupils.
The Safe School Initiative relocates students from conflict affected areas to safer federal government colleges in other states.
A number of smaller programs support education by women and for girls. Establishment of School Based Management Committees and Mothers’ Associations to empower mothers through income generating activities to positively influence the schooling of their children. The Federal Ministry of Education and UNICEF have organized training through the Girls for Girls strategy to mentor girls to enroll and complete their education in Northern States. Grants of N250,000 ($690) per year are being provided to primary and pre-primary schools with functional school-based management committees, and female teachers in service can receive a scholarship of 50,000 ($138) per year to receive the Nigeria certificate in education.
Efforts are also being made at the state level. For instance, Lagos adopted the use of a low-cost digital device with large amounts of stored learning materials, for students in the primary and secondary levels of public schools. Kaduna State embarked on mass training of teachers in 2015, relieved teachers in 2018 that did not pass the test when reassessed and replaced with qualified teachers (World Bank 2018).

17. The government also put in place a number of policies to promote gender equality, including to promote women’s education and economic empowerment. The National Strategy to End Child Marriage in Nigeria (2016) aims at changing harmful practices and contributing to improved access to education. The government developed National Action Plan on Gender, a gender policy for the Nigeria police sector, including police stations equipped to address gender base violence, and a National Gender Action Plan for the Agricultural Sector (2018). Improving education for girls is one of the three strategic priorities of the Ministry of Women Affairs and Social Development.

E. Policy Recommendations²

18. A comprehensive reform to improve quality and efficiency of services in the education sector needs to be supported by improved health outcomes, in particular for children Addressing Nigeria’s vast education challenge will without doubt require increasing resources to invest these priority sectors. However, it will also require other reforms and a reorientation of the education system, including through a package of the following reforms (World Bank 2018). These reforms include, for instance:

Operationalizing and implementing policies to reach the targets under the Human Capital Vision document.
Improving and institutionalizing collection of administrative data on the education system. Such data would include schools’ geo-coordinates and student learning assessment data.
Improving the quality of teachers to raise the efficiency of education. Needed reforms concern recruitment, deployment, training, and higher teacher salaries.
Measuring the performance of the Universal Basic Education Intervention Fund and Tertiary Education Trust Fund based on results, such as better learning environments, teacher numbers and effectiveness, and student learning.
Pursuing evidence-based interventions, including demand-side interventions that enable poor and vulnerable populations to demand services, supply side interventions targeted at building capacity and strengthening resource management, and result-based financing to improve performance incentives.
To ensure better learning outcomes for children and increase the productivity of the labor force, improvements in health outcomes is also critical. Here, higher and regular funding will be essential help execution of planned projects, to operationalize the Basic Health Care Provision Fund, and to fund the government’s National Strategic Health Development Plan II (NSHDP II).

19. Policies to address gender gaps should be a critical element in improving health and education, including to ensure improvements to access in services benefit all. Selected policy recommendations include:

Passing the “Gender and Equal Opportunities Bill” into law at national and state levels and domesticating and implementing the Children’s Rights Act, the Violence against Persons Prohibition Act and Disabilities Act at state levels remains critical.
Enforcing civil and criminal law when customary law is in contradiction with non-discriminatory policies will be critical. e.g. by working with traditional leaders and local governance and provide paralegal services for women, strengthen the Legal Aid Council, and institutionalize Alternative Dispute Resolution Mechanisms.
Addressing gender-based violence by strengthen existing national databases to track prevalence, patterns and efficacy of gender-based violence responses and championing effective response mechanisms.
Continuing to take leadership on the Call to Action on Protection from Gender-Based Violence in Emergencies. Strengthen programs that reduce vulnerability of women and girls is important, including through adequate and safe access to water and sanitation facilities the lack of which poses a disproportional risk to women and girls. These measures would also help narrowing gender gaps in education attainment, especially in the North.
Introducing training programs to reduce gender gaps in particular occupations, implementing programs to shift norms against women working in specific professions and empowering adolescent girls to pursue various career tracks.
Providing gender-responsive health services, including by addressing the social norms that inhibit access and decision making for women and standardised, regular provision of menstrual hygiene supplies, including to support girls’ school attendance.

References

Development Partner Group Nigeria (DPG). 2019. Engagement Motes (forthcoming).
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Federal Government of Nigeria. 2019. Second National Strategic Health Development Plan 2018–2022.
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World Bank. 2018. “Nigeria Biannual Economic Update. Investing in Human Capital for Nigeria’s Future.”
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IMF. 2017. Argentina. “How to Reduce Argentina’s Tax Wedge”. Argentina Selected Issues. IMF Country Report No. 17/410.
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IMF. 2018. Iran. “Fostering Incentives for Women to Work to Promote Long-term Growth in Iran. Iran Selected Issues. IMF Country Report No. 18/94.
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IMF. 2019. “Gender Gaps in Senegal: From Education to Labor Market.” Senegal Selected Issues. IMF Country Report No. 19/28.
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Prepared by Vivian Malta (SPR) and Monique Newiak (AFR). This selected issues paper has benefited from comments received during presentations and discussions with government officials, in particular the Federal Ministry of Health and the Federal Ministry of Education, Ministry of Women Affairs and Social Development, and development partners (High Commission of Canada, UNICEF, the Norwegian Embassy and Plan International) in Nigeria, and comments by the World Bank (Muna Salih Meky). We also thank Claudia Berg, Lisa Kolovich and Brooke Tenison for valuable inputs. Policy recommendations on health, education and gender are aligned with recommendations made by the Nigeria development partners group.

Drawing heavily findings and policy measures by the Department for International Development, the World Bank, UNICEF, UN Women and other development partners.

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