N355.9bn NELFUND loans face recovery risk

The Federal Government has been urged to integrate the Nigeria Education Loan Fund with Nigeria Revenue Service income data to strengthen student loan recovery.

The recommendation was contained in a policy brief released on Monday by a Nigerian higher education policy think tank, The iRead To Live Initiative.

Since its portal launch in May 2024, it has disbursed a total of N355.87bn in student loans as of September 2026.

The brief titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” warned that the N355.87bn disbursed by NELFUND to about 850,000 beneficiaries could be difficult to recover under the existing repayment architecture.

The think tank argued that Nigeria had roughly 18 months to strengthen the loan recovery infrastructure before beneficiaries who complete the mandatory two-year post-National Youth Service Corps grace period become subject to enforcement.

It recommended the integration of NELFUND with Nigeria Revenue Service income data to enable the government to track and recover loans from self-employed graduates and other borrowers outside formal employer payroll systems.

The initiative said relying principally on employer-based deductions was inadequate in an economy with a large informal workforce.

According to the brief, “The scheme’s ability to recover the disbursed loans remains untested and structurally at risk, raising the same question that sank Nigeria’s three previous student loan attempts. What happens when repayment comes due, and the borrowers cannot be found?

“The central recommendation is straightforward: use the roughly 18 months before the first cohort’s enforcement window opens to integrate NELFUND with Nigeria Revenue Service income data, extending recovery capacity to self-employed graduates rather than relying on employer withholding alone.”

The think tank warned that without such reforms, the student loan scheme could face the same sustainability problems that undermined Nigeria’s previous attempts at student financing.

“Nigeria has tried student loans three times before. Each one collapsed because loans went out faster than the government could ever recover them,” it said.

It, however, stressed that NELFUND’s performance could not yet be judged by the same standard because no beneficiary cohort had reached the repayment stage.

“No cohort has yet reached the repayment window,” the brief noted, adding that the real test of the scheme would come when repayments begin.

The think tank said the existing repayment framework assumed the availability of formal payroll employment, which it described as a major weakness given Nigeria’s high level of informality.

It noted that employer withholding under Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, could not adequately capture graduates who are self-employed, underemployed or working outside the formal sector.

The brief stated that the employer-notification provision “is not automatic in the way payroll withholding through a tax authority is, and it does nothing for the self-employed majority Section 28(4) also depends on.”

It cited international experience to buttress its recommendation, noting that Kenya’s Higher Education Loans Board had integrated its recovery system with the Kenya Revenue Authority and credit bureaus, yet 32.5 per cent of its loan portfolio was reportedly in default as of June 2025.

The initiative said the Kenyan experience showed that even tax-authority integration could not eliminate recovery challenges in economies with widespread informality.

“NELFUND sits closer to grant-like systems than to the tax-integrated models that have achieved the highest recovery rates elsewhere,” the brief said.

It added that NELFUND lacked even the tax-authority integration available in Kenya, despite Nigeria having a significant informal labour market.

The think tank also urged the National Assembly to clarify the status of interest on NELFUND loans, citing an apparent inconsistency in the 2024 Act.

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

According to the brief, the discrepancy “could expose the scheme to legal challenge from borrowers who relied on its public marketing.”

The think tank noted that the future of the student loan scheme would be determined by decisions taken before repayments begin, rather than by the amount already disbursed.

“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.