N355.9bn NELFUND Loans Face Recovery Risk

A policy brief has warned that the recovery of N355.87bn in student loans disbursed by the Nigeria Education Loan Fund could face significant challenges under the existing repayment system.

The warning was contained in a policy brief titled Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme, which examined the sustainability of the Federal Government’s student loan programme.

NELFUND has disbursed N355.87bn in student loans to about 850,000 beneficiaries since the launch of its portal in May 2024. However, the policy brief cautioned that the ability to recover the funds remains largely untested because no beneficiary cohort has yet reached the repayment stage.

It noted that the first beneficiaries would have roughly 18 months before completing the mandatory two-year post-National Youth Service Corps grace period, after which loan repayment enforcement could begin.

The policy brief recommended integrating NELFUND’s records with income data from the Nigeria Revenue Service to improve the government’s ability to identify borrowers and recover loans when repayment becomes due.

It argued that the current repayment framework relies heavily on deductions through formal employers, creating a major gap in a country where a large proportion of workers operate outside formal payroll systems.

According to the policy brief, self-employed graduates, underemployed workers and those operating within the informal economy could be difficult to identify and track under the existing system.

It warned that without stronger recovery mechanisms, NELFUND could encounter difficulties similar to previous attempts at establishing sustainable student loan schemes in Nigeria.

The policy brief also called on the National Assembly to clarify the treatment of interest under the Students Loans (Access to Higher Education) Act, 2024. It pointed to an apparent inconsistency between the public presentation of the loans as interest-free and a provision of the law referring to repayment of capital and interest.

The initiative said the sustainability of NELFUND would ultimately depend not on the amount already disbursed but on whether effective repayment systems are established before beneficiaries enter the enforcement window.

It therefore urged authorities to strengthen the recovery architecture now, particularly by using available income and tax information to reach borrowers beyond formal employment.

The warning comes as NELFUND continues to expand access to higher education financing nationwide.