The potential of the higher education system to act as an agent of growth and development in Nigeria is being challenged by the long-standing problems of limited access, inadequate financing, poor governance, declining quality and relevance. Thus, this paper provides an overview of the trends and nature of public funding of higher education in Nigeria. The arguments in this paper support increased public investment in higher education for many reasons. First, most societies believe that education is a public service; hence, its provision is not and needs not be justified on economic ground alone. More so, schooling, especially at the tertiary level, has a large number of direct beneficial effects beyond raising economic output, such as lowering child mortality, hedging options and non-market returns among others. The paper however recognises the fact that government alone cannot provide all the resources needed to increase access into and promote quality of higher education, thus the need for alternative financial mechanisms to complement public funds in higher education.