You are currently viewing Student Loans: A Game Changer for Education Financing in Nigeria by Prof. Tunji Olaopa
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The Tinubu administration has just signed into law the student loan fund (SLF) that is meant to critically address the funding gaps that have plagued higher education in Nigeria. The bill, introduced in 2016, is called the “Student Loans (Access to Higher Education) Act, 2023.” The SLF is meant to provide easy access to available loans that will ease education especially for indigent students in Nigeria’s tertiary institutions. The signing of this Act gives me a sense of reform relief, even though it is coming after such a long time.

In the year 2000, during my stint as the head of the Education Sector Analysis Unit of the Policy Division at the Presidency, we were confronted with the protracted crisis of funding and access to tertiary education. This issue is at the very heart of the dispute, still ongoing, between the Federal Government and the Academic Staff Union of Universities (ASUU). After a deep-seated diagnostic analysis, it became evident, first, that alternative learning platforms, like the open and distant learning system, had become inevitable in a country like Nigeria. And that we had to draw on comparative global best practices to make it happen. Second, the diagnostic study revealed the imperative need for institutional financing schemes that would facilitate the expansion of the existing structures that enable students make the most of their educational access through scholarship, grants, loans, bursaries and other targeted subsidies by the government at various levels. This was to be enabled by the student loans scheme (SLS) and the idea of the education bank in ways that heavily subsidize access to higher education in a cost-sharing arrangement between the government and the students. This diagnosis was backed up by an immediate research and evidence-based study tour, sponsored by the World Bank, that enabled my team to attend a World Bank seminar and training workshop in Denver, Colorado, United States. This intensive training exercise concerned issues of designing the SLS and managing its implementation and intended objectives, as well as mapping all the desirable institutional collaborations, especially with commercial banks and other regulatory mechanisms that will make its implementation successful.        

While I am very delighted that the federal government has eventually arrived at the SLF, the time it takes to get to this point—twenty-three years after it was first broached as a policy option, and seven years after the bill was introduced in the National Assembly—is a negative testament to how long it takes for game-changing policies to ever get signed into law, if ever they are signed into law or even get implemented. And now that we have arrived at the commencement of this beautiful policy, we need to diligently explore its many ramifications and implementational requirements to make it fill the financing gaps that it is meant to address in the first place.

Funding higher education has remained a huge problem since it became axiomatic that education has become critical to fashioning a human capital framework for enhancing the development agenda of states. This crisis of funding higher education arises from the multiple deficits of tertiary education in Nigeria, the source of many conflicts and analyses by scholars and educationists. A major avatar of the struggle to address higher education and its many challenges remains ASUU and its many notorious strikes that have in turn crippled the universities for many years. These challenges are fundamental: poor financing, inability to recruit and retain quality staff, poor research funding, inadequate infrastructural facilities, lack of quality incentives, poor governance, and many more. We must not also forget to add the numerous and incessant strikes that are meant to address these challenges, but which eventually contribute to the damage they are meant to address.   

This is the fundamental context that gave birth to the imperative of alternative policy thinking around funding and access to higher education, and specifically, SLF, with favorable conditions, targeted at specific fields that can contribute immensely to undermining the bottlenecks that freeze the loosening up of manpower skills in those fields. This is why the scheme is now operational in over fifty countries all across the world with different variations and with Colombia as pioneer. The objective of adopting the scheme as an alternative means of financing higher education are essentially five: (i) income generation and therefore financial autonomy, (ii) facilitating the expansion of higher education, (iii) improving equity and access for the poor, (iv) meeting specific manpower needs, (v) easing student financial burdens, and (vi) increase the supply of manpower in specialized and specific areas of national skills and competence gaps.

With the SLF therefore, there is the prospect of an increased flow of funding into the higher education system in ways that make for an equitable infusion that trumps the conventional financing through scholarship, bursaries and grants that are often crippled by fiscal deficit, bureaucratic corruption and acute politicization of the schemes. And this immediately signaled why the implementation of this SLF must be the function of an internal efficiency of the institution that supervises its implementation to achieve the desired objectives. But then, as my reform lesson has taught me so critically: the devil is always in the details. And the details in this regard concerns the implementation of any beautifully designed policy at all. There is no good policy that cannot be undermined during execution. And the SLF is not an exception. For instance, there is the number one crucial issue of who qualifies for this loan. If the SLF exclude in any way those it is meant to serve in terms of encouraging and facilitating access to education, then its purpose is defeated already. Critical attention must therefore go into fine-tuning the accessing of the fund by indigent students since it is meant for them in the first place. Since the scheme is subsidized, the government need to weigh its involvement in terms of its solid and sustained capital investment and the extent of the subsidy so as to ensure that the principle of equity is not undermined, and the poor students are not short-changed. Thus, the lower the interest rate and the longer the repayment period, the greater will the efficiency of the loan be.  


This is not to say that policies do not fail in their design stage too. And this is where all stakeholders in this Act must really pay attention in order to ensure that the trajectory of the policy, from design and formulation to implementation, is not fatally flawed as to render it useless. One key issue concerns the administrative model for the SLF. This demands some deep and creative reflection so as to guarantee that the policy objectives will be properly conceptualized, coordinated and implemented coherently. The institutional mechanism and management system that go into the administrative model must learn and adapt what works and does not work in comparable countries experiences as well as the Nigerian good financial institution practices. This is to ensure that the SLF does not collapse and lose its good objectives like similar institutional financing schemes and institutions in Nigeria. Policy creativity demands, of course, the establishment of an agency to administer the SLF.

The agency will be saddled with the responsibility of thinking through and to thoroughly dimension the challenges embedded in the conditions for and the operational guidelines and procedures guiding its disbursement, repayment terms for the loans, assistance from and relationship with commercial banks, and other issues that will make for a seamless administration. Of course, the SLF agency has to be girded and circumscribed by good corporate governance practices that will prevent the SLF from being undermined by bureaucratic bottlenecks and corruption. The management of the loan-fund and the dynamics of its administration will be crucial matters to beware of. Nigeria’s unfortunate statistics of youth unemployment that will play a critical role in how the framework of repayment will play out. There is also the important issue of those who have benefitted from the loans not being able to pay back because they are only able to get low-paying jobs, or struggling in the informal sector to make ends meet. And this should make us wary because even the United State is currently facing an epidemic of federal student loan debts totalling $1.6trillion as at September, 2022. The government and all stakeholders therefore have a fundamental stake in ensuring its success. Nigeria is a postcolonial and underdeveloping state with lots of dysfunction and deficit. But that is not an indication that good policies cannot be monitored to perform excellently.


That the SLF has now become a reform reality, and is in the process of being implemented, is a significant development, according to my reform intuition. Indeed, I am excited that the fundamental crisis of funding higher education in Nigeria is getting attention from a government that wants to tackle the development agenda from the perspective of facilitating human capital development. We can only just wait and keep hoping that the SLF will do what it is meant to do—alleviate the crisis of funding higher education in ways that will enhance the injection of critical funds into tertiary education and loosen up the dynamics that will throw up critical human capital that energize Nigeria’s development agenda.   

Source: Newspot Nigeria


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