Nigeria’s recently introduced student loan scheme aims to expand access to higher
education, reduce economic and financial exclusion, and democratize opportunity.
While the intention is laudable, the scheme’s design and implementation raise
concerns about sustainability. Examining the features of the programme reveal some
structural vulnerabilities that call for some tweaking and reforms.
The Main Problem: Mismatched Priorities
The scheme targets the wrong set of students, favoring academic pathways over
technical and vocational education. This approach ignores labor market demands,
earnings potential, and Nigeria’s economic needs.
Key Issues:
1. Loans Are Targeted at the Wrong Set of Students
The scheme doesn’t distinguish between courses with strong labor-market demand and
those with weak employability outcomes. This creates a predictable outcome: large
volumes of debt extended to graduates who’ll struggle to repay.
2. Nigeria’s Economy Would Be Better Served by Prioritizing Technical Education
Nigeria needs skilled workers, not just degree holders. Technical and vocational
education and training (TVET) can provide easily absorbed, productive, and employable
skills. Countries like Germany, South Korea, and Singapore have successfully
industrialized by prioritizing technical education.
3. Technical Vocations Are Better Suited to Entrepreneurship and Employment
Absorption
Technical skills lend themselves to self-employment and small enterprise creation that
are better suited to the reduction of structural unemployment. A trained technician can
start a micro-business, absorb informal-sector labor, and serve domestic and regional
markets more easily than a white collared graduate whose fortunes are limited at
absorption into a seemingly saturated job market. Saturated because of the increasing
discordance between academic curricula and actual job market needs.
4. Nigeria Leaks Foreign Exchange on Imported Technical Skills whilst stockpiling
difficult to assimilate university graduates
Nigeria imports technical expertise at high forex cost, while exporting the few fit for
purpose graduates it creates. This results in a significant economic leakage that cannot
be corrected just by student loan schemes. Currently, our universities are struggling
with raising the funds needed for the significant capital assets and human resource
retooling that is required to bring them up to date. Funds that the government alone
cannot bear. The current structure of the scheme will therefore exacerbate the
economic imbalances and further systemic inefficiencies.
5. Universities Require Far More Capital to Meet Global Standards
Nigerian universities need significant investment to achieve global competitiveness.
Modern laboratories, updated curricula, and robust research infrastructure are capital-
intensive and slow to yield returns.
A separate but focused endeavour to tackle this problem must be embarked upon,
starting with the honest consideration of whether the Federal and State Governments
should own the reported 70 universities each. 140 institutions offering God knows how
many courses, that are unlikely to be anywhere near the world standards that Nigeria
was known for in the 60s, 70s and 80s. At the same time, the 130 odd technical colleges
lie comatose on aggregate as regards quality of instructors and teaching tools.
6. Collectibility Will Be Severely Constrained by Weak Data and Enforcement Systems
Nigeria’s loan recovery capacity is weak due to inadequate identity management
systems, unreliable income data, poor institutional communication links and
fragmented payroll systems. Without improvement, default rates will be high, and fiscal
burden will increase.
7. Additional Structural Risks
Demographic pressures, moral hazard, institutional capture, and macroeconomic
volatility compound the problem. These factors strain sustainability and are
destabilizing.
Recommendations:
1. Prioritize TVET: Focus on technical and vocational education.
2. Link Loans to Employability: Tie loans to labor market demands and earnings
potential.
3. Strengthen Institutional Capacity: Improve loan recovery mechanisms and improve
systemic communication efficiencies.
4. Invest in Data and Tracking: Enhance graduate tracking and income verification.
5. Reform University Funding: Explore alternative funding models, seek ownership
partnerships for universities.
6. Streamline university courses on offer and consider consolidating university charters.
7. Encourage Entrepreneurship: Support technical skills and small enterprise creation.
8. Track and report data and value details of imported technical skills. Make this front
and center of national awareness.
9. Incentivize technical education by diverting more loans and scholarships in this
direction.
10. Embark on a national enlightenment campaign that will place more prestige and
respect on technical education.
Conclusion
Nigeria’s student loan scheme requires strategic alignment with economic reality and
national needs. By addressing these key issues and implementing reforms, we can
create a sustainable system that benefits students, the economy, and future
generations.
A student loan scheme that truly supports Nigeria’s development must address the
country’s strategic needs, industrialization requirements, enhance the country’s global
competitiveness and reduce our human resource development vulnerabilities.
– Tunde Sodade Ph.D
