The Nigerian Education Loan Fund may struggle to sustain its student loan scheme unless the Federal Government urgently establishes an effective system for recovering loans before the first batch of beneficiaries becomes due for repayment, education and finance experts have warned.
They spoke at a webinar themed “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” organised by iRead To Live Initiative in partnership with BudgIT Foundation.
The warning came against the backdrop of the disbursement of about N372.62bn to thousands of students across 319 institutions in two years since the scheme’s commencement.
The first repayments under the scheme are expected around 2028.
Unveiling the policy brief at the webinar, the Executive Director of the iRead To Live Initiative, Jacob Sule, said the warning was informed by the failure of Nigeria’s previous student loan schemes, launched in 1972, 1988 and 1993.
According to the brief, previous schemes collapsed because loans were disbursed without adequate mechanisms for recovering them.
It stated that NELFUND’s huge disbursement could not, on its own, be regarded as evidence that the scheme was sustainable.
The brief noted that the Fund had yet to experience a recovery failure because no cohort of beneficiaries had reached the repayment stage.
The report held that the period before the first repayment became due offered the government an opportunity to correct the weaknesses in the scheme.
The report stated, “The scale of NELFUND’s disbursement is not enough to establish the sustainability of the scheme.”
It added, “NELFUND has not yet experienced a recovery failure because no cohort of borrowers has reached the repayment stage.”
According to the brief, the Fund was entering a critical phase similar to the early stages of previous student loan schemes, characterised by large disbursements, untested recovery mechanisms and funding arrangements yet to demonstrate long-term stability.
It warned that NELFUND’s statutory power to recover loans through legal means could have limited impact if beneficiaries could not be located or their incomes tracked.
The report said, “The statutory power to recover loans through legal means will have limited impact if borrowers cannot be located or their incomes tracked.”