NELFUND risks collapse without recovery reforms – Experts

A major warning has been issued against the Nigerian Education Loan Fund (NELFUND), suggesting the organization may crumble without effective loan recovery reforms. The concern was voiced by education and finance experts during a webinar, "Can NELFUND Sustain Itself? Financing Nigeria's Student Loan Scheme," organized by iRead To Live Initiative and BudgIT Foundation.

The warning comes as the Fund disbursed approximately N372.62 billion to thousands of students across 319 institutions over the past two years. The first loan repayments under the scheme are expected around 2028. Experts pointed to the collapse of previous student loan schemes in 1972, 1988, and 1993 due to a lack of adequate mechanisms for recovering loans.

They argued that NELFUND's massive disbursements alone do not guarantee its sustainability, as the Fund has yet to face a recovery failure since no cohort of borrowers has reached the repayment stage. The experts emphasized that the upcoming repayment period is a critical juncture that could expose weaknesses in the scheme. They warned that without a robust system for recovering loans, NELFUND's statutory power to pursue legal recovery could be ineffective due to challenges in locating beneficiaries and tracking their incomes.

The report recommended that NELFUND integrate with the Nigeria Revenue Service to track self-employed beneficiaries and strengthen its recovery system, given that 93% of employment in Nigeria is informal. Concerns were also raised about NELFUND's funding sources, particularly its reliance on ad hoc transfers, including recovered proceeds of crime and executive directives, which raises doubts about the Fund's long-term financial stability.

The report urged the government to clarify the distribution formula for the Development Levy and protect NELFUND's core financing from political interference.