The Federal Government has been urged to integrate the Nigerian Education Loan Fund (NELFUND) with the Nigeria Revenue Service income database to strengthen the recovery of student loans.
The recommendation was contained in a policy brief released on Monday by Nigerian higher education policy think tank, The iRead To Live Initiative.
The report, titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” raised concerns about the long-term sustainability of the student loan programme, noting that NELFUND had disbursed N355.87 billion to about 850,000 beneficiaries as of September 2026.
The think tank warned that recovering the funds could prove difficult under the existing repayment system, particularly because a significant proportion of Nigeria’s workforce operates outside the formal employment sector.
FG Has 18 Months to Strengthen Recovery System
According to the policy brief, the government has roughly 18 months to strengthen the loan recovery infrastructure before beneficiaries who have completed the mandatory two-year post-National Youth Service Corps grace period become subject to repayment enforcement.
The organisation recommended linking NELFUND with Nigeria Revenue Service income data to enable the government to identify and recover loans from self-employed graduates and other borrowers who are not captured through formal employer payroll systems.
It argued that relying mainly on employer-based deductions would be inadequate in an economy with a large informal workforce.
“The scheme’s ability to recover the disbursed loans remains untested and structurally at risk,” the report stated.
The think tank added that the period before repayment begins should be used to build a system capable of tracking borrowers beyond formal employment.
Previous Student Loan Schemes Failed
The initiative warned that NELFUND could face challenges similar to those that undermined previous student loan schemes in Nigeria if effective recovery mechanisms are not established.
“Nigeria has tried student loans three times before. Each one collapsed because loans went out faster than the government could ever recover them,” it said.
However, the group noted that NELFUND’s performance cannot yet be judged against those previous schemes because no beneficiary cohort has reached the repayment stage.
“No cohort has yet reached the repayment window,” the report stated, adding that the real test of the programme would begin when beneficiaries start making repayments.
Informal Sector a Major Challenge
The policy brief identified Nigeria’s high level of economic informality as a major weakness in the current repayment framework.
It noted that employer deductions provided for under Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, may not adequately capture self-employed, underemployed or informal-sector graduates.
The organisation argued that the employer-notification system is not equivalent to automatic payroll deductions through a tax authority and does not effectively address borrowers who work for themselves.
The think tank referenced Kenya’s experience, noting that its Higher Education Loans Board had integrated loan recovery with the Kenya Revenue Authority and credit bureaus, although 32.5 per cent of its loan portfolio was reportedly in default as of June 2025.
It said the Kenyan experience demonstrated that tax-authority integration alone could not eliminate recovery challenges in economies with widespread informal employment.
Lawmakers Urged to Clarify Interest on Loans
The think tank also called on the National Assembly to clarify the status of interest on NELFUND loans, pointing to what it described as an inconsistency in the 2024 law.
According to the report, while the loans have been publicly presented as interest-free, Section 17(1)(c) of the Act lists “repayment of capital and interest” among the Fund’s sources of revenue.
The initiative warned that the discrepancy could potentially create legal challenges from borrowers who relied on the government’s public description of the loans as interest-free.
The organisation concluded that the sustainability of Nigeria’s student loan scheme would ultimately depend not on the amount already disbursed, but on decisions taken before repayment begins.
“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.
