Future of Nigeria’s Student Loan Scheme Depends on Critical Reforms Before Repayments Begin.

Future of Nigeria’s Student Loan Scheme Depends on Critical Reforms Before Repayments Begin.

The Nigerian government’s attempt at establishing a sustainable student loan scheme faces significant challenges, with recent reports highlighting a looming risk of recovery failure for N355.9 billion disbursed through the Nigeria Education Loan Fund (NELFUND). A policy brief by the think tank, The iRead To Live Initiative, emphasizes that unless reforms are implemented swiftly, the scheme could suffer the same fate as Nigeria’s previous failed initiatives.

Since launching its disbursement portal in May 2024, NELFUND has granted loans to approximately 850,000 students, totaling N355.87 billion by September 2026. However, the think tank warns that the existing repayment infrastructure is inadequate, primarily relying on employer-based deductions, which are insufficient given Nigeria’s large informal economy. The scheme’s ability to recover funds remains untested, and experts warn of potential default and collection issues once beneficiaries complete the mandatory two-year post-NYSC grace period.

The core recommendation from the policy brief is to integrate NELFUND’s system with the Nigeria Revenue Service (NRS) data, enabling the government to track and recover loans from self-employed graduates and those outside formal employment. Relying solely on employer deductions, as currently structured under the Students Loans Act of 2024, neglects a significant portion of Nigeria’s workforce, which operates in the informal sector. The brief cites Kenya’s experience, where even with integration of tax agencies and credit bureaus, default rates remain high at 32.5%. This demonstrates that tax-integration alone cannot fully resolve recovery challenges in economies with widespread informality.

Moreover, the report highlights a legal inconsistency regarding interest on NELFUND loans. While publicly presented as interest-free, the 2024 Act lists “repayment of capital and interest” as revenue sources, raising potential legal risks and confusion among borrowers. The timing of repayment and the legal framework surrounding interest charges require clarification to prevent future disputes.

The think tank emphasizes that Nigeria’s history of failed student loan schemes was primarily due to disbursing loans faster than recovery, a pattern that must be avoided. The performance of NELFUND, however, cannot be accurately assessed yet, as no cohort has entered repayment. The real test will come when repayments commence and collection strategies are put into practice.

In conclusion, the report urges urgent reforms, especially integrating NELFUND with revenue data, to prevent the scheme’s collapse. Without these measures, Nigeria risks repeating past failures and losing public confidence in its efforts to expand access to higher education through sustainable financing. The future of Nigeria’s student loan program hinges on decisions made in the coming months, before repayment obligations fully kick in.

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