Nigeria’s Student Loan Initiative: Progress, Pitfalls, and Solutions

The launch of the Student Loan Programme in Nigeria, coupled with the endorsement of its Amendment bill by the administration under President Bola Tinubu, signifies a promising step towards revitalizing the nation’s education sector.

This initiative holds the potential to revolutionize the educational landscape and empower Nigerian youth, paving the way for a brighter future.

It is gratifying to note that the Federal Government has allocated five billion naira (N5bn) in 2023 supplementary appropriations and fifty billion naira (N50bn) in the 2024 budget.

However, the lack of disbursement of the loans despite the allocation of significant funds raises concerns about the effectiveness of the implementation strategies, particularly the committee-based management approach outlined in the law.

The truth of the matter is that the student loan concept is a noble and much-needed initiative by the current administration to improve access to quality Education for indigent students but may likely fail because of a lack of a well-thought-out implementation structure and operational frameworks.

Overview of Management, and Administration of the Student Loan Fund in accordance with Student Loans Acts 2023

The fund is to be domiciled in the Central Bank of Nigeria (CBN) and managed by an 11-person special committee chaired by the CBN governor, as the law stipulates in Section 5.

The special committee consists of the CBN governor as chairperson and a secretary to be appointed by the chairperson.

Membership of the committee as dictated by the law includes the ministers responsible for Education and finance, or the latter’s representatives, and the Auditor-General of the Federation.

Other members are the Chairman, the National Universities Commission (NUC), a representative of the forum of university Vice Chancellors, a representative of the forum of polytechnic Rectors, and the forum of Provosts of all Colleges of Education in the country.

Also, a representative of the Nigeria Labour Congress (NLC), a representative of the Nigerian Bar Association (NBA), and a representative of the Academic Staff Union of Universities (ASUU) are members.

This committee is saddled with the responsibility of deciding the broad modalities, including the process of application for the loan, qualification criteria to get the loan, and also the repayment plan among other details.

“The Committee shall establish regulations and guidelines for the management, administration, disbursement, and recoupment of students’ loans under this Act, and all stakeholders, including parents, the beneficiaries of the students’ loans, and the deposit banks, shall comply with the regulations and guidelines,” Section 5(5) states.”

Section 5 (2) of the Act also states that the fund “shall be domiciled with, managed, and administered by the Central Bank of Nigeria through the money deposit banks in Nigeria for the purpose set out under Section 6 of this Act.”

Meanwhile, the tenure of each member lasts through the time he/she holds the position. As soon as he/she is replaced or retired, the successor takes his/her position in the special committee, Section 8 states.

A member also ceases to be a part of the committee when he/she becomes bankrupt, convicted of a felony or any offence involving dishonesty or fraud, becomes of unsound mind, or is incapable, for any reason, of discharging his/her duties.

The Flaws of the Committee-Based Implementation Model for Nigeria Student Loans:

The committee structure outlined for managing the student loan programme in Nigeria may encounter several challenges that could hinder its effectiveness.

The federal government should rework the proposed student loan administration and management framework as encapsulated in the Acts. While there is nothing wrong with the caliber of people included in the committee, such a committee should be upgraded to a “Governing Board” to perform oversight and provide strategic leadership and corporate governance for the management of the loan, and not be involved in the day-to-day running the loan disbursement operations under a new agency called “Nigeria Student Loans Management Agency” (NSLMA).

In my view, administering a newly established student loan by a committee headed by the CBN Governor instead of establishing a Nigerian student loan agency or commission like the US Department of Education’s Federal Student Aid (FSA) and the Student Loan Company (SLC) as being practiced in the US and the UK may lead to several potential problems.

Firstly, the committee may lack the necessary expertise and experience in managing student loans, thereby resulting in inefficiencies and unoptimised processes.

Also, without a dedicated agency or commission, there may be a lack of accountability and transparency in the loan administration process.

Additionally, the absence of a specialised student loan entity could lead to delays in loan disbursement, inadequate support services for borrowers, and inconsistencies in loan policies and procedures.

Furthermore, the diverse composition of the committee, including government officials, education stakeholders, and union representatives, could lead to conflicting interests and slow decision-making processes.

Lastly, the lack of a specialised focus on student loan management within the committee may result in inefficient operations and delayed disbursement of loans.

Successful Student Loan Management Model: Comparative Analysis

In countries like the United Kingdom and the United States, successful student loan programmes are managed by dedicated agencies with specific expertise in financial aid disbursement. For instance, the United Kingdom established the Student Loans Company (SLC) who administer student loans efficiently. Similarly, the U.S. Department of Education’s Federal Student Aid (FSA) manages federal student loans effectively through streamlined processes and specialised resources.

Here are the website links for the government student loan management agencies in the US and the UK: United States: U.S. Department of Education’s Federal Student Aid (FSA): https://studentaid.gov/

FSA manages federal student loans in the US, including direct loans, PLUS loans, and federal Perkins loans.

United Kingdom:

Student Loans Company (SLC): https://www.gov.uk/student-finance

SLC handles student loans and grants for students in England, Scotland, Wales, and Northern Ireland.

Advocating for a Dedicated Student Loans Agency to Manage Nigerian Student Loans:

(Appeal for Review and Action: The Way Forward)

1. To ensure the success of the student loan programme in Nigeria, the implementation model needs to shift towards establishing a dedicated agency such as the Nigeria Student Loans Management Agency (NSLMA).

This agency would be solely focused on managing student loans, with a clear mandate and expertise in loan administration. By emulating successful models from countries like the United Kingdom’s Student Loans Company (SLC) and the United States’ U.S. Department of Education’s Federal Student Aid (FSA), as earlier emphasized Nigeria can streamline loan disbursement processes, this will enhance transparency, and improve efficiency in managing student loans.

2 In light of the potential challenges posed by the current committee-based implementation model for the student loan programme, it is crucial for the Nigerian government to reevaluate its approach. A call is made to President Bola Tinubu and the National Assembly to consider amending the existing legislation to establish the Nigeria Student Loans Management Agency (NSLMA) for the effective management of student loans.

3. The Federal Government should set up a panel and committee to visit and study US-FAS and the UK student loan companies to gain insight into their operations.

4. The Federal Government should consider establishing the Nigeria Student Loans Management Agency (NSLMA) to be managed by top-notch professionals in order to guarantee the loan’s scheme effectiveness, proper accountability, easy access to the loans by the students, and overall sustainability of the scheme.

5. To address the shortcomings of the committee-based model in Nigeria, the establishment of the Nigeria Student Loans Management Agency (NSLMA) is hereby proposed. The NSLMA would serve as an independent agency solely dedicated to managing student loans in the country.

Key Functions of NSLMA:

Loan Disbursement: The NSLMA would be responsible for overseeing the disbursement of student loans in a timely and efficient manner.

(a) Loan Administration: Managing the administrative processes related to student loan applications, approvals, and repayments.

(b) Regulatory Oversight: Ensuring compliance with regulations and guidelines related to student loan management.

(c) Stakeholder Engagement: Collaborating with Educational institutions, financial institutions, and student associations to enhance the effectiveness of the student loan programme.

(d) Evaluating loan applications and determining eligibility criteria

(e) Providing financial counseling and support services to loan beneficiaries

(f) Monitoring loan performance and enforcing repayment agreements

Composition and Structure of NSLMA:

1. Governing Board: Comprising individuals with expertise in finance, education, and governance, the Board would provide strategic direction and oversight to the NSLMA. The current management compositions as stipulated in the Loan Acts 2023 can be upgraded or converted to the Governing Board.

2. Executive Leadership: A dedicated team of professionals, including a Chief Executive Officer and key executives, would be responsible for day-to-day operations and decision-making.

3. Specialised Departments: Divisions focusing on loan processing, customer service, compliance, and data management would ensure the efficient functioning of the NSLMA

Parting Words:

The success of Nigeria’s Student Loan Programme hinges on the effectiveness of its implementation strategies. By recognising the limitations of the committee-based model and advocating for the establishment of a dedicated student loan agency, Nigeria can overcome obstacles and pave the way for a more inclusive and sustainable education financing system.

It is time for Nigeria to prioritise the needs of its students and invest in a robust and independent student loan management agency to drive positive change in the Education sector.

 

 

Oroge is the Chief Executive Officer of Debt Doctors Consulting Services International Limited, a firm specializing in credit, debt, and financial advisory services.

He can be contacted via WhatsApp at 08023551457 or by email at saoprofessional@yahoo.com.