Lack of reliable data on learning outcomes, critical mass, scalability and long-term planning are preventing private sector investors from harnessing opportunities in Lagos state education market, says Developing Effective Private Education Nigeria (DEEPEN), a programme funded by UKAID, applicable to other markets across Nigeria.
According to the results of a recent survey conducted by DEEPEN, the private education market in Lagos is valued at $3.2 billion but commercial investors a keeping away from it because there is a lack of clarity.
“Investors in general and financial institutions in particular shy away from investing in education because they have a hard time measuring return on investment. Bankers do not understand what schools are doing and schools seem not to understand the language of investors” said Bunmi Lawson, Managing Director/CEO Accion Microfinance Bank Ltd on Thursday at the launch of Business of Education in Africa Report, sponsored by Caerus Capital and United Kingdom Department for International Development (DFID).
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Recent trends around the world show that private sector driven education is the new normal and the way forward. This brings market principles to bear on how the curriculum is designed and what skill sets are embedded in the education system. The World Bank is launching a fund of over $600 million for results-based learning outcomes next year, proof of recent bent towards measurable educational outcomes, which government-funded schools might not be in a position to deliver.
“There is about 40 per cent of children in private schools today in Nigeria because parents are voting with their feet. There are over 18, 000 private schools and about 2, 000 public schools in Lagos, a sign that the private sector has become dominant in the education space. Efforts should be geared towards leveraging private sector competencies in delivering low-cost, market-relevant education” said Pauline Seenan, the Team Leader of Human Development Team at DFID Nigeria. “This is the most reliable way to grow the human capital needed to grow Nigeria’s economy.”
Private sector interest in the education sector is not new. A half-year into 2017, AfricInvest, a US$1 billion asset, mid-market private equity firm backed International Community School, a private school in Ghana, in a preferential share deal. The investment was the sixth for AfricInvest’s third private equity fund, which is now 50 per cent 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 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.
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his 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 per cent resulting in a funding gap of 16.64 per cent, representing N840 billion, according to the United Nations Educational, Scientific and Cultural Organisation (UNESCO) benchmark of 26 per cent of the national budget.
“Government simply can’t 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 the 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.
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“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.
The 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
