13/10/2026
NELFUND Faces Fresh Crisis as Experts Warn of Loan Recovery Challenges
Education and finance experts have warned that Nigeria’s student loan scheme could face a funding crisis if the Federal Government fails to put an effective loan recovery mechanism in place before beneficiaries begin repaying their loans in 2028.
The warning was issued at a webinar organised by the iRead To Live Initiative in partnership with BudgIT Foundation, where experts examined the sustainability of the Nigerian Education Loan Fund (NELFUND) amid concerns about its funding structure, repayment framework and long-term viability.
The discussion followed the disbursement of approximately N372.62bn to students in 319 institutions within two years of the scheme’s introduction.
Presenting a policy brief at the event, the Executive Director of the iRead To Live Initiative, Jacob Sule, said the experience of Nigeria’s previous student loan schemes showed that disbursement alone could not guarantee sustainability.
He cited the collapse of student loan programmes introduced in 1972, 1988 and 1993, attributing their failure to inadequate arrangements for recovering disbursed funds.
The brief warned that NELFUND could follow a similar trajectory if it failed to address weaknesses in its repayment and financing systems before the first beneficiaries became liable for repayment.
“The scale of NELFUND’s disbursement is not enough to establish the sustainability of the scheme.”
It further stated, “NELFUND has not yet experienced a recovery failure because no cohort of borrowers has reached the repayment stage.”
According to the report, the period before repayments commence presents an opportunity for the government to strengthen the scheme before potential defaults expose its weaknesses.
It noted that NELFUND was approaching a critical stage characterised by substantial disbursements, untested recovery arrangements and funding sources yet to demonstrate long-term reliability.
One of the major challenges identified was the difficulty of tracking beneficiaries who work outside the formal employment system.
Under the Students Loans (Access to Higher Education) Act, 2024, repayments are capped at 10 per cent of a beneficiary’s gross monthly income, while enforcement cannot commence until two years after the completion of the National Youth Service Corps programme.
However, the report questioned the effectiveness of a repayment model that depends heavily on deductions by employers in an economy dominated by informal employment.
“NELFUND’s reliance on employer deductions presents a significant recovery risk in an economy where 93 per cent of employment is informal.”
The brief argued that the Fund’s legal authority to recover outstanding loans would offer limited protection if borrowers could not be located or their earnings established.
“The statutory power to recover loans through legal means will have limited impact if borrowers cannot be located or their incomes tracked.”
It recommended integrating NELFUND’s systems with Nigeria Revenue Service income records to enable the identification and tracking of self-employed beneficiaries.
# # Funding structure raises sustainability concerns
Beyond loan recovery, the report identified uncertainty surrounding NELFUND’s funding arrangements as another threat to the scheme.
Its statutory funding sources include one per cent of Nigeria Revenue Service collections, National Assembly appropriations, loan repayments, investment income, borrowed funds, education bonds and other sources.
However, the policy brief said the Fund had relied significantly on discretionary transfers, including recovered proceeds of crime and executive directives, rather than a predictable stream of statutory revenue.
“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 urged the government to clarify how the Development Levy would be distributed and ensure that NELFUND’s core funding was not left to political decisions.
“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.”
The report cautioned that the Fund’s initial operational achievements should not be mistaken for proof that its financing model could withstand the demands of a nationwide student loan programme over the long term.
“NELFUND’s early administrative success should not be confused with proof of long-term sustainability.”
As of September 3, 2026, NELFUND had processed more than 1.65 million applications, expanded its operations to 319 beneficiary institutions and established a national verification system using the National Identification Number and Bank Verification Number.
Acknowledging these achievements, the report said, “Both things are true at once.”
It explained that NELFUND could be “a genuine administrative achievement in its first two years” while remaining exposed to statutory and financial weaknesses that could threaten the scheme when repayments begin.
# # Experts question interest-free loan policy
The legal framework governing interest on NELFUND loans also came under scrutiny, with the policy brief arguing that the 2024 Act did not explicitly establish that the loans were interest-free.
It pointed to provisions referring to capital and interest as sources of revenue for the Fund, as well as deductions continuing until the loan and all associated charges had been repaid.
“The Act does not expressly state that NELFUND loans are interest-free.”
The report called on the National Assembly to amend the relevant provisions or NELFUND to issue a definitive clarification before the first group of beneficiaries entered the loan enforcement window.
Speaking at the webinar, a Professor of Public Administration, Isaac Obasi, praised NELFUND’s “implementation passion” but said the ambiguity over interest needed to be resolved to prevent beneficiaries from developing the wrong perception of the scheme.
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 advocated a statutory funding arrangement that would guarantee NELFUND a defined share of tax revenue, suggesting that even a one per cent allocation from the Federal Inland Revenue Service would provide a more reliable funding base.
He cautioned against dependence on funds recovered by the Economic and Financial Crimes Commission, arguing that such an arrangement would not provide sufficient certainty for long-term planning.
The professor also questioned how the Fund intended to calculate and recover repayments from beneficiaries working in the informal sector.
“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?”
# # Tuition increases undermine affordability, expert says
An educator and human resources strategist, Prof Yomi Fawehinmi, questioned the government's decision to remove a means-test provision from the student loan legislation, arguing that the change had weakened the scheme's focus on financially disadvantaged students.
According to him, the initial draft of the bill restricted access to applicants whose incomes fell below a specified threshold, but the provision was subsequently 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 increases in tuition fees at some institutions, claiming that charges 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 reconsider its spending priorities and direct more resources towards basic education, particularly in view of the number of children who remain 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.
He maintained that the student loan scheme had not improved university funding or resolved persistent problems involving infrastructure and educational quality.
Fawehinmi also questioned the scheme's long-term political prospects, alleging that its establishment was linked to the 2027 general elections.
“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.”
# # BudgIT calls for transparency and accountability
A Research and Policy Analyst at the BudgIT Foundation, Ibukunoluwa James, warned that the absence of a statutory allocation for NELFUND exposed the scheme to political interference and uncertainty over funding.
“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 Fund, stressing that access to verifiable financial records was essential to building public confidence.
“Public finance works best when citizens don’t have to choose who to believe. They should be able to believe the audit trail.”
Meanwhile, a credit risk and governance specialist, Raphael Ajiboye, urged NELFUND to conduct a repayment-readiness stress test within 90 days to identify potential defaults before repayments begin.
“In credit risk management, you don’t manage yesterday’s default. You manage tomorrow’s probability of default,” Ajiboye said.
He said the Fund lacked a comprehensive repayment data plan and a portfolio risk framework, making it difficult to assess the likelihood of beneficiaries meeting their obligations.
“There is an absence of a repayment data plan. There is no portfolio risk framework,” he said.
Ajiboye recommended categorising beneficiaries according to their characteristics to help NELFUND evaluate repayment risks and develop appropriate recovery strategies.
“NELFUND must be looking at repayment from now, not after disbursement,” he added.
# # Policy brief seeks audit of disbursements
The report also called for an independent audit of NELFUND disbursements at the institutional level following controversy over an earlier statement by the Independent Corrupt Practices and Other Related Offences Commission.
The commission had alleged that only N28.8bn of the N100bn released to institutions had reached students. It subsequently retracted the statement, attributing it to a drafting error and clarifying that no discrepancy in the disbursement process had been established.
Despite the retraction, the policy brief recommended that an institution-by-institution audit be conducted and published to resolve outstanding concerns and strengthen accountability.
It also called for NELFUND to routinely publish beneficiary statistics by gender, state and geopolitical zone, as well as disability status where feasible.
The report said the absence of regularly published, disaggregated data made it difficult to determine whether the scheme was reaching students equitably across the country.
Participants at the webinar, which attracted attendees from Nigeria and abroad, also raised concerns about data protection, repayment timelines and the need for clear guidelines on loan recovery.
A graduate beneficiary recounted how a system glitch left many students at his university without tuition payments and upkeep allowances for an entire academic session.
He asked, “How can we trust NELFUND to solve issues like this and stop it from happening again?”
The discussions ended with calls for NELFUND to establish a functional loan recovery system before 2028, clarify whether its loans attract interest, secure predictable statutory funding and make audited accounts and beneficiary data publicly accessible.
The policy brief warned that the period leading up to the end of the first repayment cohort’s enforcement grace period would be decisive in determining whether Nigeria could establish a sustainable student financing system or repeat the failures of earlier schemes.
“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.”
