ABUJA — About N355.87 billion disbursed by the Nigeria Education Loan Fund, NELFUND, could face recovery challenges when repayments begin unless the Federal Government urgently strengthens the scheme’s repayment architecture, a higher education policy think tank has warned.
The iRead To Live Initiative, in a policy brief released on Monday, urged the government to integrate NELFUND with income data from the Nigeria Revenue Service to track beneficiaries and recover loans, particularly from self-employed graduates and other borrowers outside the formal payroll system.
The warning came in the group’s latest policy brief titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme.”
NELFUND has disbursed N355.87 billion in student loans to about 850,000 beneficiaries since its portal was launched in May 2024.
But the think tank said the scheme’s ability to recover the funds remained untested, warning that its current repayment framework could leave the government unable to trace a significant number of beneficiaries when repayment obligations take effect.
It said Nigeria had roughly 18 months to strengthen its loan recovery infrastructure before beneficiaries who complete the mandatory two-year post-National Youth Service Corps grace period become subject to enforcement.
“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 brief stated.
The organisation said integrating NELFUND with Nigeria Revenue Service income data would enable the government to track self-employed graduates, extending recovery beyond formal employer-based deductions.
It argued that relying principally on employers to deduct repayments was inadequate in a country with a large informal workforce.
“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,” it said.
The initiative warned that failure to address the recovery gap could expose NELFUND to 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 stated.
However, the group acknowledged that NELFUND’s performance could not yet be judged against those failed schemes because no beneficiary cohort had entered the repayment window.
“No cohort has yet reached the repayment window,” it noted, adding that the real test of the scheme would begin when repayments commence.
The think tank identified the repayment framework’s dependence on formal employment as one of its major weaknesses, particularly given Nigeria’s high level of economic informality.
It cited Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, arguing that employer-based deductions would not adequately capture graduates who are self-employed, underemployed or working outside the formal sector.
According to the brief, 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.”
Kenya’s experience
The organisation cited Kenya’s Higher Education Loans Board, which has integrated its recovery system with the Kenya Revenue Authority and credit bureaus.
Despite the arrangement, it said 32.5 per cent of Kenya’s student loan portfolio was in default as of June 2025, showing that tax-authority integration alone could not eliminate repayment difficulties in an economy 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 noted that NELFUND lacked even the tax-authority integration available in Kenya despite Nigeria’s substantial informal labour market.
‘Clarify interest position’
The think tank also called on the National Assembly to clarify the legal status of interest on NELFUND loans, citing what it described as an apparent inconsistency in the 2024 Act.
It noted that although 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.
The group warned that the discrepancy could expose the scheme to legal challenges from borrowers who relied on its public description as an interest-free loan programme.
It said the future of NELFUND would ultimately be determined by measures 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.
