The surging unemployment rate and the prospect of high default rate as seen in the past have been identified as major challenges that will face the new student loan scheme in Nigeria.
President Bola Tinubu recently signed the Student Loan Bill into law.
According to a global youth unemployment index, Nigeria has the second highest number of unemployed youths in the world. Nigeria’s 53 percent youth unemployment rate makes it second to only South Africa with 61 percent.
A National Bureau of Statistics report in the first quarter of 2023 shows that youth unemployment was 42.5 percent, and youth under-employment was at 21 percent.
Zikora Ibe, policy and research officer at Corporate Accountability and Public Participation Africa, expressed concerns that the scheme has the potential to create repayment hardship for intended beneficiaries.
“Considering the Nigerian context, where graduates often struggle to secure gainful employment five years or more after completing their education and NYSC, it becomes clear why this provision undermines the interest-free advantage of the loan scheme,” he said.
According to Ibe, the repayment of the student loan that is tied to a period of two years after completing the National Youth Service Corps (NYSC), rather than being based on evidence of employment or self-employment, defeats the goal it is meant to serve.
She said pegging the repayment of the loan on mandatory two years after NYSC disregards whether a grantee has the means to repay the loan within the specified timeframe.
She said: “It will subject grantees to immense pressure to repay a loan they simply cannot afford. This situation can lead to distress, depression, and, in extreme cases, even suicide.
“However, how will the education bank enforce this repayment plan on grantees that have been unfortunate in finding a job or establishing self-employment within two years of graduation or realising an income above the current minimum wage, which is grossly inadequate?”
Ibe maintained that the loan should have been made to come with guaranteed employment and income for its beneficiaries, given Nigeria’s rising unemployment and inflation rates.
Hence, she advocated for a review of the loan scheme repayment plan.
“Potential grantees may suffer and become vulnerable to desperate measures by creditors to recover the loan. If this student loan scheme is to avoid resembling loan shark practices, it is evident that these contradictory and burdensome provisions must be reviewed,” she said.
Charles Onwunali, a senior lecturer at the University of Lagos, said the country does not have the system in place to monitor the disbursement and repayment of the loan.
“They want to use it to increase school fees. We don’t have the system to monitor it. Even in advanced countries students still default in payment of the loan, talk-less in Nigeria where the system is porous,” he said.
Friday Erhabor, director of media and strategy at Marklenez Limited, advised the federal government to work on the economy first so that the rate of unemployment will be drastically reduced.
He said there is a need for a drastic change in the country’s economic outlook, which according to him is currently bleak.
“The objective of the loan is unlikely to be realised. Improving the economy and employment rate is the only way students can repay the loan. Otherwise, the government has created another ‘people’s bank’ that will fail or an avenue for politicians to filter money away,” he said.
Some experts believe that the unemployment problem should have been considered before arriving at the student loan repayment plan.
They said it may be difficult for the government to recover the loans because some Nigerians see government loans as an opportunity to benefit from “the national cake”.
Ifeanyi Eke, an educationist, expressed worry that many Nigerians see anything from the government as their entitlement.
“Nigerians don’t like to pay loans, even when it’s from financial firms, more especially when it’s from the government. We most times consider loans from the government as our rights, hence, there’s the tendency that grantees may decide not to pay,” he said.
Eke cited an instance where the federal government gave loans to farmers some years ago and at maturity, many of them could not pay back.
“Many Nigerians have a very negative attitude to things from the government. I don’t see the students being different; they won’t pay back the loans; some will even travel abroad with the money,” he said.