NELFUND’s N355.9bn student loans face recovery concerns

The initiative said the real test of the scheme’s sustainability would begin when beneficiaries enter the repayment phase.

It also identified Nigeria’s high level of informal employment as a major weakness in the current recovery framework.

According to the brief, the employer-based deduction system provided for under Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, may not adequately capture beneficiaries who are self-employed, underemployed or working outside the formal sector.

The group said the employer-notification provision was not automatic in the same way as deductions administered through a tax authority and was therefore limited in its ability to reach self-employed borrowers.

The think tank cited Kenya as an example, noting that the country’s Higher Education Loans Board had integrated its loan recovery system with the Kenya Revenue Authority and credit bureaus.

Despite the arrangement, it said about 32.5 per cent of Kenya’s student loan portfolio was reportedly in default as of June 2025.

According to the initiative, the Kenyan experience shows that integration with tax authorities alone may not completely resolve loan recovery challenges in countries with large informal economies.

It said NELFUND currently lacked the level of tax-based recovery integration available in Kenya, despite Nigeria’s significant informal labour market.

The policy group also called on the National Assembly to provide clarity on the issue of interest on NELFUND loans, citing what it described as an apparent contradiction in the Students Loans Act.

It noted that while the loans have been publicly presented as interest-free, Section 17(1)(c) of the Act lists “repayment of capital and interest” as one of the Fund’s sources of revenue.

According to the brief, the inconsistency could potentially create legal issues if borrowers who applied for the loans based on their interest-free status challenge the provision.

The think tank maintained that the long-term success of the student loan scheme would depend largely on measures put in place before repayments begin.

“Whether Nigeria breaks its decades-long pattern of failed student loan schemes will be decided by choices made now, not by the scale of what has already been disbursed,” the brief stated.