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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 percent 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 enrollment 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 biggest economy’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 percent.
That gives a funding gap of 16.64 percent or N840 billion, using the United Nations Educational, Scientific and Cultural Organisation (UNESCO) education benchmark of 26 percent 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 Bank-Olemoh, 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 $48 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.
Some experts say private investment in education presents an exciting opportunity to go beyond the simple provision of private capital and complement existing education delivery and funding systems. One of the most promising impacts is that investment opportunities will support the growth and integration of the entire education system across students, education providers, employers, governments and private investors. These include public – private partnerships, tailored student financing solutions, and venture capital funds.
“As public-sector budgets get tighter, educational administrators are under more and more pressure to find new ways to do more with less, and that opens the door to a wider field of public-private partnerships” said Gossy Ukanwoke, a higher education investor & Founder at Nigeria-based Beni American University Research & Development.
A recent study found 266 private equity firms in the United States of America alone with investments in education. These firms have broad holdings in different aspects of K-12 or higher education ranging from direct investments in institutions or schools, education services such as administrative services, marketing, recruitment, education technology, educational content, or professional training.
In India, private equity (PE) and venture capital (VC) funds have infused $804.29 million between 2006 and 2012 in education. But PE is largely confined to non-formal education segments like vocational education and coaching centres, as it is an unregulated sector.
Education sector is less sensitive to economic cycles, which makes it attractive. PE investors expect an average rate of return of 200 per cent in three to five years.
STEPHEN ONYEKWELU
