Private returns to higher education in Nigeria

The idea of education as a capital good is rooted in the concept of “human capital†, which attaches a high premium to human skills as a factor of production in the development process. Education is known to be an important determinant of earnings in market economies. The higher an individual’s educational attainment, the higher that individual’s expected starting salary and the steeper the rise in earning capacity over time, especially during the early working years. This study investigates the variation in the rate of return to different levels of education. The study endeavours to determine the relationship between years of schooling and earnings (rate of return) in Nigeria. The effect of the amount of time in the labour force on earnings is also examined and an attempt made to highlight and calculate the private rates of return to graduates of higher educational institutions according to sectors of the economy and sex of the graduate. The descriptive statistics and ordinary least squares (OLS) estimation results reveal that the mean monthly earnings of workers increase with more years of schooling. The private rate of returns is low for graduates of colleges of education. It is higher for polytechnic graduates and higher still for university graduates. Furthermore, the mean earnings increase with higher years of labour market experience. Thus, the higher the level of education, the higher the rate of return to the individual. Efforts should be made to improve the quality and investment in this level of education by encouraging private individuals to invest in and pay for higher education.