Nigeria's ambitious plans for student loans are facing a significant reality check. The Nigeria Education Loan Fund, NELFUND, has already disbursed a substantial N355.87 billion to approximately 850,000 students since its portal launched in May 2024. However, a stark warning from the policy think tank, the iRead To Live Initiative, suggests this enormous sum could be lost if the government doesn't promptly address loan repayment mechanisms.
The iRead To Live Initiative, in a policy brief released on Monday titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” is raising a critical concern: the scheme's actual ability to recover funds remains entirely unproven. They're apprehensive that by the time graduates are expected to begin repayment, the government won't be able to locate a significant number of them, particularly those who are self-employed rather than formally employed.
Nigeria has roughly 18 months to implement necessary changes. This timeframe is crucial because it precedes the period when the first cohort of students, after completing their mandatory National Youth Service Corps (NYSC) and a two-year grace period, will be legally obligated to start repaying their loans. The think tank is strongly advocating for NELFUND to be integrated with income data from the Nigeria Revenue Service (NRS). This integration would allow for better tracking of self-employed graduates and ensure their compliance with repayment obligations, moving beyond a reliance solely on employer deductions.
This situation isn't unprecedented in Nigeria's history. The report highlights that Nigeria has attempted student loan programs on three previous occasions. Each of these initiatives ultimately failed because loans were disbursed at a rate far exceeding the government's capacity for collection. The iRead To Live Initiative is unequivocal: if NELFUND succumbs to similar challenges, its long-term viability is in serious doubt.
However, they do concede that NELFUND hasn't truly been tested yet, as no borrower has yet commenced repayment. The true test will manifest when those repayment deadlines arrive. One of the most significant vulnerabilities they've identified is the current system's primary reliance on formal employment for loan recovery. This presents a considerable challenge in Nigeria, where a substantial portion of the workforce operates within the informal sector. This includes individuals like small traders, artisans, and freelance professionals who lack a conventional payroll system.
The Students Loans (Access to Higher Education) Act of 2024 does stipulate that employers should facilitate payment deductions. Yet, as the brief emphasizes, this provision doesn't guarantee a foolproof collection process. It isn't an automatic system comparable to payroll deductions managed by a tax authority. Furthermore, it offers no solution for the large number of graduates who are self-employed. The legislation, particularly Section 28(4), appears to place considerable emphasis on these employer deductions, a method that is demonstrably insufficient for a diverse employment landscape.
Examining Kenya's experience, the iRead To Live Initiative observed that even its Higher Education Loans Board, which has established links with the Kenya Revenue Authority and credit bureaus, continues to encounter difficulties. As of June 2025, a significant 32.5% of Kenya's student loan portfolio was in default. This data illustrates that mere integration with a tax authority isn't a panacea, especially within economies characterized by a substantial informal labor market.
In comparison to Kenya's existing framework, NELFUND lags even further behind. It hasn't yet established the tax authority integration that Kenya possesses. This is particularly concerning given Nigeria's extensive informal labor market, which necessitates a more robust recovery strategy. The report posits that NELFUND is currently structured more akin to a grant disbursement program rather than a fully integrated loan recovery model, such as those that have demonstrated success internationally.
Beyond the critical issue of repayment mechanisms, the think tank is also urging the National Assembly to clarify ambiguities surrounding loan interest. While NELFUND has been promoted as an interest-free program, Section 17(1)(c) of the Act enumerates "repayment of capital and interest" as a source of revenue for the Fund. This apparent discrepancy has the potential to trigger legal disputes with borrowers who were under the impression that they wouldn't incur any interest charges whatsoever.
Ultimately, NELFUND's future success is contingent upon the decisive actions implemented within the next 18 months, prior to the commencement of loan repayments. The focus shouldn't solely be on the disbursed funds but on constructing a sustainable system capable of effective loan recovery.