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Foreign schools, local tuition

On Friday penultimate week, the United States government unveiled sweeping regulations designed to aggressively suppress China’s technological ability to manufacture advanced microchips, the defining technology…

On Friday penultimate week, the United States government unveiled sweeping regulations designed to aggressively suppress China’s technological ability to manufacture advanced microchips, the defining technology of this digital age. The regulations target China’s high-tech giants like Huawei and ZTE, and imposed stiff limits on US and allied countries’ technology companies operating in China about how much know-how of this new technology they can share with their Chinese counterparts, even for strictly business or civilian purposes. The regulations will complement the government’s CHIPS ACT, enacted only in August this year, which will provide about $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the US.  

The Biden administration’s thinking is clear. Semiconductors and microchips are the golden technologies of the day, and are central to everything digital from smart phones and laptops, to spaceships and drones, to precision missiles and nuclear warheads. This makes them key to global economic and military dominance, today, and in the foreseeable future. The US and its allies like Taiwan, Korea, the Netherlands and a few others presently have the know-how for the latest and most advanced versions of this technology, and therefore seek to frustrate the ability of a rising rival power like China in acquiring it.    

In apparent reference to these US regulations in his speech yesterday at the Communist Party Conference, Chinese President Xi Jinping called for self-reliance and the need for China to win what he calls,”the battle over key core technologies”. This is high water international politics, no doubt, but it helps to illustrate how far countries can go to pursue or protect what they consider as their national interests.  

No one talks about “free trade” and “free market” than the United States. Yet, it is the same US that came up with these protectionist trade regulations to openly stifle a perceived adversary in the interest of their own national security. And beyond this case, the US and many other countries, including China itself, do this all the time.  

In contrast, Nigeria does not even appear to have clearly defined issues of national security interest. In fact, many of Nigeria’s economic and social policies are often designed to promote the interests of other countries against our own national interest, even if inadvertently. Consider, for example, a curious story in The Punch newspaper of Monday last week headlined “Foreign education gulped $609.5m in eight months — CBN”. The story shows how since January, Nigerians’ spending on foreign education has shot up, according to CBN data, from $60.2m in January, to $87.2m in March, to $84.9m in June, making up a total of $609.5m by August.   

How should we interpret this? First, let us convert the dollar figure into naira. According to the official exchange rates of N434 per $1 used by the OandA Currency Converter, $609.5m is about N265bn. But the real value is in fact about N446.7bn based on an exchange rate of N733 to $1 on the parallel market. This means that the federal government, through the CBN, actually subsidised the cost of foreign education for a few thousand Nigerian students to the tune of N182bn. And that, at a time our own universities were closed by ASUU strike for virtually the same period. 

Now, foreign education is one of the items for which the CBN is required by policy to provide dollars at the official exchange rates. But this policy actually means that the federal government and the CBN are subsidising foreign education for Nigerians who desire it for their children, at the expense of everyone else, and regardless of the overall national economic conditions at any given time. In other words, while the federal government could not find money for ASUU to reopen our own universities for hundreds of thousands of Nigerian students, the same government in fact paid N182bn in subsidy for the education of a few thousands abroad.  

This is the real implication of the parallel exchange rates policy, and in this specific case, it is nothing short of criminal folly because it means that poorer Nigerians are paying for the foreign education of those better off, while watching their own children languish at home in the name of ASUU strike. And considering the massive pressures that the naira has suffered in the past few years, this gives us a single example of how the policies we make ourselves can work against our national interest, since we can all agree that a strong enough naira relative to foreign currencies is in Nigeria’s national interest. It is also an example of how inequality can be inadvertently built into public policies, which then work against the overall national interest.  

But the problem does not end even if foreign education is delisted from the items for which the CBN must provide dollars at official rates because it would still mean that Nigerians spent N447bn on foreign education in eight months. For me, this would still be very bad for Nigeria because it represents a massive cash outflow that could have been better put to use in our own universities, both public and private, after all, private universities in Nigeria are still Nigerian universities attended almost entirely by Nigerian students.  

The N447bn we spent for foreign education between January and August this year alone was paid for by the federal government (N182bn) and Nigerian parents whose children are studying abroad (N265bn). But this money is also roughly the same as the N470bn the federal government will now borrow in the 2023 budget to pay ASUU for increased salaries for lecturers and so-called revitalisation funding for universities. This means that the money the government was looking for, that caused the long strike, and must now borrow to end it, was all along right here in Nigeria.  

So, a sensible long term public policy would seek to retain as much of that N447bn at home to develop our own institutions, especially if we extrapolate this eight months spent over say three, five or 10 years. That means enacting policies that would make it easier for both our private and public universities to have access to funds to enable them provide world-class education at home on the one hand. And on the other hand, it means enacting policies that would make it more expensive for parents who still seek foreign education for their children.  

Both of these, in turn, mean tuition fees in public universities and extra costs for foreign education. It means that the federal government must at least delist foreign education from the items for which the CBN is required to provide dollars at official exchange rates, if not scrap the parallel exchange regime altogether. But it also means that ASUU must have a rethink about is continuing opposition to tuition fees of any kind in public universities.  

On the cuff, I suggest three policy measures. One, ASUU and the government can agree a tuition fee of between N300,000-N500,000, depending on course of study, and frozen over the next five to ten years. Two, delist foreign education from CBN official exchange rates and introduce taxes for anyone paying tuition fees to a foreign institution to the equivalent of 50 per cent of the tuition paid. That money could then be ploughed back into both public and private universities in the form of grants, scholarships and interest-free student loans. And three, introduce safety nets like student loans for all who need it, fully funded scholarships for exceptional students, and exceptions from the foreign education tax for those who obtain scholarships from foreign schools.  

Whatever we do, we must realise that while it is good news that the long strike has finally ended, we cannot continue to borrow to fund public universities every year, and certainly, we cannot continue to subsidize foreign education for a few every month. This is now a matter of national security.