Last Friday, July 22, the University of Lagos (Unilag) increased school fees by about 500 per cent. Unity Schools have also announced an increase of about 122 per cent. In both cases, this takes effect from the 2023/24 academic session.
Unilag made this decision known through an official bulletin statement from the university’s branch of the Senior Staff Association of Nigerian Universities (SSANU), on July 20. At a joint meeting of the chairpersons of the non-teaching unions, representing SSANU, Non-Academic Staff Union (NASU), and National Association of Academic Technologists (NAAT) from Akoka campus and the College of Medicine, Idi Araba.
Professor Folasade Ogunsola, vice chancellor, of Unilag, shared her concerns about the country’s economic situation and the impact of fuel subsidy removal, high power tariffs, and the impending hike in student charges for tertiary institutions. During the meeting, the proposed fees for undergraduate students at Unilag were disclosed.
Students without lab or studio use would pay ₦100,750, those with lab use would pay ₦140,250, and College of Medicine undergraduates would pay ₦190,250. The official document emphasised that this applies nationally. These increases were from the previous range of ₦16,000 to ₦21,000.
Similarly, the Federal Government of Nigeria through the Federal Ministry of Education has increased the school fees of new students into Federal Government Colleges otherwise known as Federal Unity Colleges to ₦100,000. This was contained in a directive from the Office of the Director of Senior Secondary Education Department of the Federal Ministry of Education, reference number ADF/120/DSSE/I, dated 25th May 2023 and addressed to all Principals of Federal Unity Colleges.
According to the circular entitled, “Approved fees/ charges for Federal Unity Colleges (1st Term) for new students“, signed by the Director of Senior Secondary Education, Hajia Binta Abdulkadir, new students are expected to pay ₦100,000 instead of the previous ₦45,000.
Ogunsola cited Nigeria’s economic situation as the context and justification for increasing the school fees. These economic realities also apply to Unity Schools and private schools that would announce increases in fees as well. Schools operate within an economy.
Let us look closely at Nigeria’s economy starting with inflation, and how it affects households and small and medium-scale businesses. Then we will look at petrol and power subsidies and how they have been a drain on Nigeria’s treasury and wasteful. We denounce, however, the abrupt removal of these subsidies without planned palliative measures. However, it is important to understand the economic realities driving the school fee increases.
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Inflation: impact on households and businesses
Nigeria’s inflation rate has continued to accelerate reaching a new 17-year high at 22.79 per cent in June 2023. This has posed significant problems for households, small and medium-scale businesses among which are schools.
Inflation is a general increase in prices and a decrease in the purchasing value of money. It means that the same amount of money buys fewer goods and services. Inflation can have a significant impact on households, small and medium-scale businesses, and the economy as a whole.
It erodes the purchasing power of households, meaning that they can buy fewer goods and services with the same amount of money. This can lead to a decline in living standards, as households may have to cut back on spending or borrow money to make ends meet.
Inflation can also lead to an increase in the cost of living, as businesses pass on rising costs to consumers in the form of higher prices. This can make it difficult for households to make ends meet, especially those on low incomes.
It can also reduce the value of savings, as the purchasing power of savings decreases over time. This can make it difficult for households to save for retirement or other long-term goals.
Inflation can increase the costs of doing business for small and medium-scale businesses, as they have to pay more for raw materials, labour, and other inputs. This can lead to a decline in profits and make it difficult for businesses to compete.
It can also reduce demand for goods and services, as consumers have less disposable income to spend. This can lead to a decline in sales and profits for businesses.
Furthermore, inflation can create uncertainty for businesses, as it is difficult to predict how prices will change in the future. This can make it difficult for businesses to plan and make investment decisions.
What this means is that prices will rise, households will struggle, businesses will struggle, school fees will increase, the cost of living will increase and the standard of living may fall for millions of households.
How inflation affects the Nigerian economy
In addition to the microeconomic impact of inflation on households and businesses, it has a macroeconomic impact. It can slow economic growth, as it can make it more difficult for businesses to invest and expand. This can lead to a decline in employment and output.
Moreso, inflation can also increase poverty, as it can erode the purchasing power of households and make it more difficult for people to make ends meet. It can also discourage investment, as investors may be less willing to invest in a country with high inflation. This can lead to a decline in economic growth.
The government has taken some steps to try to control inflation, such as increasing interest rates and reducing the money supply. However, these measures have not been very effective so far. The reason why it is not working is that the inflation we are battling is a cost push. The cost of production is high and the economics states that battling it is hard and raising interest rates is not one of the solutions to it. The solution is to bring down production costs.
We have not invented a policy tool that can work for Nigeria; the typical tools that are postulated in Western Economics textbooks cannot work for us. It is likely that inflation will continue to be a problem in Nigeria for the foreseeable future. Let us look at the petrol subsidy as one of the legs of our analysis and understanding of cost-push inflation in Nigeria.
Petrol subsidy
According to the Nigerian Extractive Industries Transparency Initiative (NEITI), Nigeria has spent a total of N13.697 trillion on petrol subsidies between 2005 and 2021. This is equivalent to about $30 billion per year.
A petrol subsidy is a government programme that keeps the price of petrol artificially low for consumers. This is done by the government paying the difference between the global price of petrol and the price that is set domestically.
The subsidy is a major drain on the Nigerian treasury. In 2021, the government spent N4.39 trillion on the subsidy, which was more than the entire budget for education.
The subsidy has been criticised for being inefficient and unfair. It is estimated that only about 10 per cent of the subsidy actually benefits the poor. The rest of the subsidy goes to wealthy consumers and fuel smugglers.
Successive governments have been under pressure to remove the subsidy, but the issue has been politicised, until recently.
However, the subsidy is unsustainable in the long term. The government cannot afford to keep paying the difference between the global price of petrol and the domestic price. If the subsidy is not removed, it will eventually lead to a financial crisis.
Power consumption subsidy
A similar scenario obtains in Nigeria’s Electricity Supply Industry (NESI). The Nigerian government has provided a power consumption subsidy to households and businesses since the 1970s. The subsidy is intended to make electricity more affordable for consumers and to encourage investment in the power sector.
It is a subsidy implemented by the Nigerian Electricity Regulatory Commission (NERC). NERC sets a maximum price that electricity distribution companies can charge consumers. The government then pays the difference between the maximum price and the actual cost of generating and distributing electricity.
The power consumption subsidy has been a major drain on the Nigerian treasury. In 2021, the government spent N144 billion on the subsidy. This is equivalent to about $3.5 billion per year.
The subsidy has been criticised for being inefficient and unfair. It is estimated that only about 10 per cent of the subsidy actually benefits the poor. The rest of the subsidy goes to wealthy consumers and electricity companies. Removing the power consumption subsidy will naturally increase tariffs. In a nutshell, these are cost variables that would further accelerate inflation in the coming months, raise the cost of operating schools leading increase in school fees and putting more pressure on already squeezed household wallets.
Dealing with the inevitable cost implications for schools and households
Schools will have to review their strategies. We will abstain from addressing Unilag and Unity schools’ fee increases in particular and instead offer broad-based pointers to solutions.
There is a strong likelihood that many students won’t return to their schools for the 2023/24 academic session because of the parabolic or exponential increase in fees. Many schools fall under this category since, in some situations, the cost of returning to school (yes, even transport costs) may be greater than the cost of tuition. If the government does not establish provisions for primary and secondary school students in large cities, many children will stop attending because of the high expense of transport.
Some schools have already started making counterintuitive choices. At a graduation party, The chairman of the school reduced fees by ₦5000 across the board and increased the teachers’ salaries by 50 per cent. He also granted four pupils scholarships for the 2023/2024 session. Uncommon strategy. More parents will go there. But many other schools will struggle.
Meanwhile, it is probably too early to see the full impact of these economic variables until schools reopen in September because the impact of petrol subsidy removal will be captured in the National Bureau of Statistics monthly consumer price index in July and its full impact will be seen in August, ahead resumption in September.
This is also the time for the Nigerian government to be more intentional about providing targeted interventions such as school fee waivers, grants, loans and scholarships to tertiary education institutions, including public universities, polytechnics, and colleges of education. These interventions would make tertiary education more affordable for students and improve the quality of education.
