The Nigerian Education Loan Fund (NELFUND) risks the loss of N355 billion in disbursed loans if it fails to implement a verified recovery system before repayments begin, according to a new report.
The warning was issued by the iRead To Live Initiative, a higher education policy think tank, which cautioned that the fund could repeat the failures of three previous student loan schemes in Nigeria.
The report suggests that while the current administration has successfully scaled the disbursement of funds to tertiary students, the mechanism for recouping those funds remains theoretical and untested.
NELFUND was established to provide tuition and upkeep loans to eligible Nigerian students, reducing the financial burden of higher education. However, the iRead To Live Initiative argues that the absence of a robust tracking and collection framework threatens the fund’s long-term viability.
Historically, Nigerian student loan attempts have collapsed due to poor data management, lack of transparency, and the inability of the state to track graduates as they entered the workforce.
The report highlights that N355 billion is currently exposed to significant risk if NELFUND cannot ensure a high rate of repayment once the grace periods for current beneficiaries expire.
Financial Sustainability and Recovery Frameworks
To avoid a systemic collapse, the think tank recommends that NELFUND integrates its recovery system with national identity and financial databases.
This would include mandatory linkage between loan accounts and the Bank Verification Number (BVN) and National Identification Number (NIN) to prevent borrowers from disappearing after graduation.
The report also suggests a partnership with the Federal Inland Revenue Service (FIRS) to implement a payroll deduction system. This would allow the government to automatically deduct loan repayments from the salaries of employed graduates, similar to the models used in several developed economies.
Without these automated safeguards, the report argues that NELFUND will rely on voluntary repayments, which have proven ineffective in previous Nigerian government loan schemes.
The Federal Ministry of Education has previously emphasised that the loan fund is a cornerstone of the government’s strategy to maintain the sustainability of public universities following the removal of tuition subsidies.
However, if the recovery rate falls significantly below projections, the government may be forced to inject more public funds into the scheme to keep it operational, creating a permanent drain on the national treasury.
The iRead To Live Initiative further noted that the current focus on the speed of disbursement should be balanced with the creation of a legal and operational framework for enforcement.
This includes clear guidelines on default penalties and the legal processes for recovering funds from high-income earners who fail to honour their obligations.
The fund’s ability to recycle capital is essential. If loans are not recovered, NELFUND will lack the liquidity to fund future cohorts of students, potentially leading to a shutdown of the program.
The NELFUND management is expected to address these systemic concerns as the first batch of loan recipients move closer to their repayment dates.
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