Impact of Foreign Aid and Institutional Efficiency on Basic Education Outcomes: A Study of Out-of-School Children in West Africa

Abstract

Aims: The study investigated the impact of foreign aid and institutional efficiency on educational outcomes, specifically focusing on out-of-school children in West Africa. By examining the interplay between external funding and local institutional capacities, this research aims to identify the conditions under which foreign aid can effectively improve educational access and outcomes. Study Design: Human Capital Theory and ex-post facto design were adopted. Duration of Study: Data used for this were secondary sourced from World Bank database on institutional effectiveness for period of 34 years 1990-2023. Methodology: Purposive sampling technique was to select countries in West Africa which are Nigeria, Ghana, Senegal, Mali, and Burkina Faso. The selection is based on their similarity in the variables of study and other economic conditions. Data were analysed using panel generalized method of moments-GMM. Results- There was a strong persistence effect across the models, where past levels of out-of-school children significantly influence current levels. Educational aid (FAid) has a statistically significant positive effect on out-of-school OSC 0.897 (p<0.01), literacy rate LR 0.9611 (p<0.01). However, the effect is small and becomes insignificant in Models (1) and (3), suggesting that foreign aid alone may not substantially reduce out-of-school children rates. The R2 and Adjusted R2 explain around 65% to 72% of the variance in literacy rate. Conclusion: Foreign aid on education has little impact on educational outcomes, specifically focusing on the rate of out-of-school children (OSC) and literacy rates (LR) in West Africa. West African countries educational attainments were studied; therefore, educational outcomes may not be explained other than foreign aid and institutional efficiency considered in this study.