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.”
It further noted that under the Students Loans (Access to Higher Education) Act, 2024, repayment was capped at deductions of not more than 10 per cent of a beneficiary’s gross monthly income, while enforcement could not begin until two years after completion of the National Youth Service Corps.
Sule said the challenge was particularly significant because of Nigeria’s large informal economy.
The brief stated, “NELFUND’s reliance on employer deductions presents a significant recovery risk in an economy where 93 per cent of employment is informal.”
It recommended that NELFUND integrate with Nigeria Revenue Service income data to identify and track self-employed beneficiaries and strengthen its recovery system.
On funding, the report said NELFUND’s statutory financing structure included one per cent of Nigeria Revenue Service collections, National Assembly appropriations, loan repayments, investment income, borrowed funds, education bonds and other sources.
It, however, raised concerns about the Fund’s reliance on ad hoc transfers.
The report stated, “The Fund has relied heavily on ad hoc transfers, including recovered proceeds of crime and executive directives, raising concerns over the sustainability of its financing base.”
It recommended that the government clarify the distribution formula for the Development Levy and protect NELFUND’s core financing from political discretion.
The brief said, “The first two years of audited revenue from the Development Levy will provide an important test of whether NELFUND is moving towards a predictable statutory funding base.”
It also warned that the Fund’s dependence on executive decisions could create uncertainty over its long-term financing.
The report stated, “NELFUND’s early administrative success should not be confused with proof of long-term sustainability.”
It noted that the Fund had established a national verification system using the National Identification Number and Bank Verification Number, processed more than 1.65 million applications and expanded to 319 beneficiary institutions as of September 3, 2026.
The brief stated, “Both things are true at once.”
It explained that NELFUND could be “a genuine administrative achievement in its first two years” while still facing statutory and financial challenges that could undermine the scheme once repayment begins.
The report also raised concerns over NELFUND’s claim that its loans were interest-free, saying the 2024 Act did not expressly state that the loans were interest-free.
It noted that some provisions of the Act referred to repayment of capital and interest as a source of revenue for the Fund and to deductions continuing until the loan and all charges were repaid.
The brief stated, “The Act does not expressly state that NELFUND loans are interest-free.”
It urged the National Assembly to amend the relevant provisions of the law or NELFUND to issue a clear position before the first repayment cohort entered its enforcement window.
Speaking at the webinar, a Professor of Public Administration, Isaac Obasi, commended NELFUND’s “implementation passion” but urged the government to resolve the uncertainty surrounding interest on the loans.
He said, “Resolve the interest-free ambiguity to remove the mentality which will creep in to believe this loan is their share of the national cake.”
Obasi also called for a statutory funding arrangement for NELFUND, proposing that the Fund receive a percentage of tax collections from the Federal Inland Revenue Service, even if one per cent.
He said relying on recovered funds from the Economic and Financial Crimes Commission could undermine the sustainability of the student loan scheme.
Obasi also raised concerns over loan recovery in Nigeria’s largely informal economy.
“The National Bureau of Statistics states that we are largely an informal economy. So, how do you track how much people earn when many are in the informal economy?” he asked.
He added, “How do you calculate 10 per cent of what people earn?”
Also speaking, an educator and human resources strategist, Prof Yomi Fawehinmi, faulted the Federal Government for removing a means-test provision from the student loan legislation and questioned the continued increase in tuition fees by some institutions.
He said the draft bill initially restricted beneficiaries to people below a specified income level, but the provision was later removed.
“It is no longer about assisting the poor to pay their fees. You no longer have a targeted audience. The outflow of funds is huge; it is like a funnel,” Fawehinmi said.
He also criticised the increase in fees by some institutions, which he said had risen by as much as 600 per cent.
“If your concern is about affordability, you will not increase NELFUND and make schools charge more,” he said.
Fawehinmi argued that the government should also prioritise basic education, noting that a large number of children remained out of school.
“Too much money is being thrown at higher education, yet there are a lot of out-of-school children who are in early education. Such funds should be disbursed to fix early education,” he said.
According to him, NELFUND had neither improved university funding nor addressed infrastructure and quality concerns in the institutions.
Fawehinmi also alleged that the motivation for NELFUND was linked to the 2027 elections, saying there could be changes to the scheme after the election.
“There might be issues of continuity of NELFUND after the 2027 election. There will be a different NELFUND after the election,” he said.
He added, “You don’t create NELFUND and increase school fees.”
A Research and Policy Analyst at the BudgIT Foundation, Ibukunoluwa James, said the absence of a statutory allocation for NELFUND left the Fund vulnerable to government discretion.
“There is no statutory allocation for NELFUND. This means that NELFUND is at the mercy of the President,” James said.
She called for greater transparency in the management of the scheme, saying, “Public finance works best when citizens don’t have to choose who to believe. They should be able to believe the audit trail.”
A credit risk and governance specialist, Raphael Ajiboye, urged NELFUND to conduct a repayment-readiness stress test within 90 days.
“In credit risk management, you don’t manage yesterday’s default. You manage tomorrow’s probability of default,” Ajiboye said.
He said NELFUND currently lacked adequate repayment data and a portfolio risk framework.
“There is an absence of a repayment data plan. There is no portfolio risk framework,” he said.
Ajiboye called for the segmentation of beneficiaries according to their characteristics to enable NELFUND to assess repayment risks.
“NELFUND must be looking at repayment from now, not after disbursement,” he added.
The policy brief also recommended an independent institution-level audit of NELFUND disbursements following an earlier statement by the Independent Corrupt Practices and Other Related Offences Commission alleging that of N100bn released to institutions, only N28.8bn had reached students.
The ICPC later retracted the statement, attributing it to a drafting error and clarifying that no discrepancy in the disbursement process had been established.
The report nevertheless recommended that an institution-level audit be published to resolve outstanding questions and improve transparency.
It also called for regular publication of beneficiary data by gender, geopolitical zone, state and, where feasible, disability status, saying the absence of routine disaggregated data made it difficult to assess whether the scheme was achieving equitable national coverage.
Participants at the webinar, which attracted people from Nigeria and abroad, also raised concerns about data protection, repayment timelines and the need for clear repayment guidelines.
A graduate beneficiary recounted how a system glitch left many students at his university without fees and upkeep for an entire academic session.
He asked, “How can we trust NELFUND to solve issues like this and stop it from happening again?”
The speakers agreed that NELFUND needed to establish a recovery system before 2028, clarify its interest position, secure stable statutory funding and make audited accounts and beneficiary data available to the public.
The policy brief concluded that the period before the first repayment cohort reached the end of its enforcement grace period would determine whether NELFUND could break away from the pattern of previous student loan schemes.
It stated, “The difference between Nigeria’s first sustainable student financing system and NELFUND will be decided by choices made now, not by the scale of what has already been disbursed.”