Following the establishment of Nigeria’s first institution of higher learning in 1948, enrollment in public universities and the number of federal and state universities in the country have increased. Enrollment increased from  15,272 in 1970 to 2,159,461 in 2019. In 2023, there were 62 and 30 federal and state universities in Nigeria. This surge is attributed to economic prosperity driven by the oil boom of the 1970s. These numbers—enrollment and the number of public universities—present a case for increased government spending on higher education. However, that has not been seen, as government allocation to tertiary education has continued to decline over the years.

A study by the World Bank highlighted that the education system, especially university education, in emerging economies, especially in sub-Saharan Africa, is heading towards heightened financial crises. One notable instance of this financial crisis in the region is the suspension of the newly introduced student grants in Zimbabwe in the 2000s due to the persistent economic crisis that hiked inflation rate, reaching an all-time world record of 1.3 million percent.

Nigeria is not free from this risk, as it still faces its share of university financing crises. This funding challenge in Nigeria is evident in the decaying infrastructure seen in most Nigerian public universities, declining education quality, and human capital flight within the university workforce. The funding crisis is apparent in the re-occurring Academic Staff Union of Universities (ASUU) strikes recorded between 1981 and 2022. These strikes have been attributed to unpaid allowances and other accrued financial benefits owed to the academic and non-academic staff of universities.  Factors such as corruption, lack of political will, poor financial planning, institutional failure, and a decline in oil revenue, among others, have exacerbated and sustained the funding crisis over the decades.

The government remains the primary financier of public universities in Nigeria, providing support for capital and recurrent expenditures. However, university funding has significantly declined in the last five years, as shown in Figure 1. In 2023, the education sector received less than 7% of the total annual budget, far below the UNESCO-recommended benchmark of 15%. Figure 1 below shows the federal tertiary education budget in relation to GDP.

Figure 1 above shows that the federal tertiary education budget in relation to GDP has declined significantly over five years. From the above, it can be inferred that the government alone can no longer sustain the funding of public tertiary education. This signals the need for public universities to consider other funding options. A viable alternative is the use of university endowment funds.  The implementation of this has proven successful in American universities as well as universities in the UK.  

University Endowment Funds, What it Entails

A university endowment fund is a type of funding universities receive from individual donors or organisations. The funds are invested, and the return on investment is used for the university's core functions. This fund comes with specific guidelines on how expenditures are made.

Also, it is classified into four categories: unrestricted, restricted, term, and quasi-fund. Unrestricted funding involves the donor handing over complete authority to the university. It allows the university board to invest, distribute, save, and utilise the fund without interference from the donor. Meanwhile, in restricted funding, the principal capital is invested, and the university can use only the return on investment for its functions.

Term endowment funding combines the features of restricted and unrestricted funding. Here, the donor restricts access to the principal capital for some time, and only the return from the invested capital can be utilised by the university board. Quasi-endowment funding is similar to the term endowment, with the difference in the unrestricted use of gifts received channelled towards meeting university core functions. The aim of utilising the gifts in term funding is to increase the level of support received from the donor in the following year.

A Case Study:

In Africa, university endowment funds are rare, with South Africa having the most established endowment fund in Africa. One prominent instance is the University of Cape Town (UCT), which collaborated with the UCT Fund (United States) and the UCT Trust (United Kingdom) to effectively raise over 107 million rand (about $10 million) from donors during the 2000s. 60% of this fund came from South Africa, demonstrating the possibility of raising endowment funds locally. A few universities have established endowment funds, including the American University in Cairo and the University of Nairobi, Kenya. However, this pales compared to the global prevalence of university endowment funding.

On the global stage, university endowments are dominant in the United States, with Harvard, Yale, and Stanford universities topping the list, amassing endowments of $50,877,680,000, $41,383,260,000, and $36,338,794,000, respectively.  The Harvard endowment fund comprises more than 14,000 individual funds invested in a single entity, with the largest part of the fund channelled to student and faculty support. The endowment fund has, over time, enabled the university to retain hundreds of professorships across diverse academic fields, conduct groundbreaking scientific and policy research, and embark on several financial aid programs. Also, the endowment fund accounted for over a third of Harvard’s total operating revenue in 2023, maintaining its position as the largest revenue source supporting the university's fiscal budget.

Why Nigerian Public Universities Should Consider University Endowments

Lessons from Harvard and other universities that have successfully established endowments are imperative for Nigerian universities. University endowment remains a powerful tool that can transform university financing and solve the long-standing issues of ASUU strike, infrastructure decay, and declining education quality in Nigeria. It can drive economic development, businesses, and government expenditures to new heights by investing endowment funds in diverse sectors of the economy.

Nigerian university financing can be transformed to spark innovations, achieve groundbreaking research, and obtain life-changing solutions through partnerships with businesses such as Globalcom, MTN, BUA, and Dangote, which are keen on tapping into Nigerian universities' vibrant pool of talents. This can be achieved by leveraging the transformative ability of endowment funds.

Nigerian universities can benefit from setting up endowment funds in the following ways:

• Stable financing: University endowments can result in long-term funding solutions that can aid university core operations, provide scholarships and fellowships, improve infrastructure and educational quality in public universities, bridge the inequality in accessing higher education, and solve the long-standing finance roadblocks contributing to ASUU strikes.
• Magnetise top talents: Quality education has continued to decline in Nigerian universities as the finest faculty members quit and leave the country in pursuit of a more promising future. In 2023, a significant percentage of lecturers from various universities departed Nigeria for abroad, with more showing signs of leaving, generating severe concerns. However, Endowment funds can help address this issue by providing the funding required to attract world-class professors and retain faculty members. Achieving this would enable Nigerian universities to conduct groundbreaking research and development and provide high-quality education.  
• Boost Entrepreneurship: Nigerian universities are brimming with young, brilliant entrepreneurs looking for early-stage funding to expand or start a business. The endowment fund can unlock these talents and foster a flourishing entrepreneurial ecosystem within the university. In addition, Endowment funds can be used to create university museums, which will attract tourists and generate additional revenue for the university.

conclusion

University enrollment in Nigeria has continued to increase. Still, tertiary education funding has retrogressed due to a decline in oil revenue, corruption, a lack of political will, poor financial planning, and institutional failure. Universities in Africa are exposed to economic crises, with sub-Saharan Africa likely to feel the impact the most.

Nigeria has had its share of university financing crises, as evident in the re-occurring ASUU strike, infrastructure decay, and declining quality of education, among other factors. With the government as the primary financier of Nigerian public universities and less than 7% of the 2023 budget allocated to education, questions arise about the government’s ability to sustain public university funding.  

Judging from the above statistics and instances, it is clear that public universities in Nigeria need to embrace alternative funding options for their core operations, and the university endowment fund is one good option. University endowment funds will significantly benefit Nigerian universities in areas including stable financing, attracting top talents, and boosting entrepreneurship within the university.

References

Adam Adem. “NIGERIA UNIVERSITY AND ITS MANDATE IN A CHANGING  WORLD”  Journal of Social Sciences and Humanities, Vol 9 No. 2, 2014, [ https://core.ac.uk/download/pdf/33344832.pdf ]

National Universities Commission. “Nigerian University System Statistical Digest” Federal Republic of Nigeria. [https://www.nuc.edu.ng/wp-content/uploads/2021/07/2019-NIGERIAN-UNIVERSITY-SYSTEM-STATISTICAL-DIGEST-CONDENSED-VERSION-FINAL-2_compressed.pdf ]

United Nations Economic and Social Council. “ Financing of education in Nigeria” International Institute for Educational Planning [https://unesdoc.unesco.org/in/documentViewer.xhtml?v=2.1.196&id=p::usmarcdef_0000076900&file=/in/rest/annotationSVC/DownloadWatermarkedAttachment/attach_import_8cb034f4-866a-4f19-873d-119f3e928d1d%3F_%3D076900engo.pdf&locale=en&multi=true&ark=/ark:/48223/pf0000076900/PDF/076900engo.pdf#%5B%7B%22num%22%3A421%2C%22gen%22%3A0%7D%2C%7B%22name%22%3A%22XYZ%22%7D%2C-403%2C774%2C0%5D ]

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United Nations Economic and Social Council. “Financing education” UNESCO: [https://www.unesco.org/en/education-policies/financing ]

Pwc. “Closing the funding gap in social infrastructure Making the case for adoption of endowment funds” pwc report: [https://www.pwc.com/ng/en/assets/pdf/adopting-endowment-funds.pdf ]

Chinh Ngo. “What Is a University Endowment?” Best College: [ https://www.bestcolleges.com/blog/university-endowments/#:~:text=University%20endowments%20are%20funds%20that,how%20it%20can%20be%20spent ]

Sarah Wood. “15 National Universities With the Biggest Endowments” U.S.News: [https://www.usnews.com/education/best-colleges/the-short-list-college/articles/10-universities-with-the-biggest-endowments ]

Harvard. “Harvard's Endowment” FINANCIAL OVERVIEW: [https://finance.harvard.edu/endowment#:~:text=Made%20up%20of%20more%20than%2014%2C000%20individual%20funds%20invested%20as,wide%20range%20of%20academic%20fields.]

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