Due to the constraints in the Student Loan Act, experts and other stakeholders are hoping that the necessary amendments would be effected to reflect the reality before the January kick-off of the implementation. Tony Akowe writes
It is no longer news that President Bola Ahmed Tinubu has directed that the new Student Loan Act signed into law immediately he assumed office should take off fully by January 2024.
The Student Loan Act is one of the first laws to be signed by President Tinubu few days after assuming office. The law is aimed at addressing financial constraints that hindered many students from gaining higher education and will provide interest-free loans to those in actual need. It is expected to have a significant impact on Nigeria’s educational system, and it could potentially extend to sectors like technology and finance.
Question on effective implementation
But the question being asked is what plans have been put in place to ensure effective implementation of the law. Incidentally, the students’ loan scheme falls within the campaign promises of the President. At one of his campaign trips, at the British Royal Institute in London, Tinubu promised to give student loans as part of efforts to develop the education sector and also build the youth capacity.
But immediately the Act became law, it came under serious criticism as some of the provisions run contrary to the objective for which it was passed and signed. This led the House of Representatives to set up an ad hoc committee to investigate and make recommendations on what need to be done to make it work better.
Appearing before the House of Representatives ad hoc committee in August, Permanent Secretary, Federal Ministry of Education, David Adejoh, had assured that the scheme would kick off in the 2023/2024 academic session – October or December.
He said:”The assurances I give to you are based on what I see. First is that no academic session in Nigeria is starting before September. Remember because of the strike apart from private and some states universities, academic calendar has been moved back. So, what we are saying now is, it might not be a 100% catchment but the loan is going to start in the 2023/2024 Academic Session. It can be October; it can be November depending on the school. Between October and November, we still stand a good chance. Once the technical committee finishes and comes to the main committee, then we will revert to the National Assembly with the clean bill. I know we can start this loan in 2023/2024 Academic Session”.
On possible amendment to the law
The Nation gathered that following observations by the Nigerians on the Act, the Federal Government set up a technical committee made up of officials of the Ministry of Education, the Central Bank of Nigeria and other stakeholders to brainstorm and come up with possible amendment to the law to remove the encumbrances against its effective implementation. The President had in his part promised that such encumbrances will be removed to make it easy for the students to apply for it. The Director of Legal Services of the Central Bank of Nigeria (CBN), who represents the apex bank in the technical committee, Kofo Alada, while speaking for the Technical Committee, said a supplementary budget was needed to make funds available for the take-off of the scheme, assuring that his team had set a target earlier than November. He said: “We are technical people working and the kind of process flow that we are looking at is something that Nigeria will be proud of. What I will request or recommend to this committee is that of the funding requirement of this project. This body (parliament) has the power to convene and say we want to give a supplementary budget for this particular project; it is within your power and for anybody. It is better to plan so it is better for us to plan”.
Making the law reflect reality of average Nigerian
The Student Loan Act provides access to education for more students through interest-free loans and financial flexibility it offers. Despite this, one major flaw of the act is that it does not reflect the reality of the average Nigerian. Ironically, most of the eligibility conditions disqualify the target population, poor Nigerians, from accessing the loan. First, the combined annual family income requirement of less than N500,000 means that only students from families earning less than N42,000 monthly can apply. Assuming a two-parent household and that both parents earn some form of income, each parent must earn less than N21,000 monthly for their children to qualify. This requirement sounds paradoxical in a country where the minimum wage is N30,000 — this implies that many families are technically not eligible to apply for the student loan.
In addition, the need to provide two guarantors represents a disconnection between the target audience and the nature of the guarantors required. Low-income-earning households with less than N500,000 annual income are less likely to have a strong enough relationship with guarantors, who can put their careers on the line for them to access the loan. The probability of a lawyer with ten years post-call experience or a civil servant of the director cadre serving as guarantors for a poor student is, therefore, low. Moreover, this requirement could encourage guarantors to demand hefty fees from poor students, fuelling cash-for-guarantor rackets.
Hon. Terseer Ugbor, who headed the ad hoc committee, was not happy about the source of funding for the scheme, especially when only the Federal Government was meant to provide the revenue. The argument is whether the students from state-owned institutions can benefit from the loan since state governments are not part of the contributors to the funds. The argument also is whether the 1% to be drawn from taxes accruing to the FIRS, Immigration, Customs and profit from petroleum products and other solid minerals would be enough.
He said: “We hope the system you are creating will be robust enough to take account of students who are already in school who want the loan to cover for the one year or two years of their schooling or students who are coming through direct entry. It seems to us from this perspective that 1% of the Federal Government Revenue as stated in the Act would not be enough to cover students loans for a year given the hundreds of thousands of students that we have getting admission every year and those who are currently in school, who may wish to also apply for a loan to cover for other years of their schooling. I want to suggest that if there is the need to increase the requirement of 1% to 3%. Then propose that and we are ever willing to look at it.
“It is something that is quite critical. This is the area that the Ministry of Education can also hold on for it to be jerk up to at least 3% of this revenue. Now, we are hearing the states or local governments may or may not permit that deduction. So, I think there may be constitutional amendment before that 1% may be drawn. So, if that is not done, the Federal Government can only draw from its own share of revenue, which means state universities may be excluded if the state governments do not agree to participate in funding this student loan from their allocation from the Federal Government
Still awaiting the Nigerian Education Loan Fund
Also, the Nigerian Education Loan Fund, which is supposed to be established under the law to drive the process, is yet to be constituted. The Fund is supposed to be managed and administered by various stakeholders led by the Central Bank of Nigeria and commercial banks, with the Governor of the Central Bank as Chairman. It is supposed to provide mechanisms for monitoring academic performance, ensuring timely loan repayment, and preventing fraudulent practices.
The law allows every Nigerian student seeking admission to an institution of higher learning to apply for the loan provided they meet certain criteria. These criteria include securing admission for a prescribed course of study into a federal or state university, polytechnic, college of education or vocational school, income of the parents or guardian of the student must not be above N500, 000 as well as providing two guarantors that are either be a civil servant of at least level 12, a lawyer with, at least, 10 years of post-call experience, a Judicial officer or Justice of Peace.
Even though the act states that there shall be no discrimination based on gender, religion, tribe, position or disability of any kind, there are arguments that if the law establishing the loan scheme is allowed to go into practice the way it currently is, several Nigerians will be denied access.
This will not be the first attempt by Nigeria at implementation of a Student loan scheme, having tried and failed under the Yakubu Gowon regime when the student loan decree died naturally. After that, another attempt at students’ loan also failed as several students failed to pay back the loan. Available information states that many of the students supplied fake addresses, making it difficult to track them for repayment. The managers of the scheme had to resort to publishing names of such students in the newspapers.
Commenting on the law, Prof. Ben Ugwoke of the University of Abuja said that the introduction of the loan scheme amounts to placing the cart before the horse. He said: “Sincerely, I think the introduction of the students’ loan scheme in Nigeria is like placing the cart before the horse. The scheme is supposed to be a revolving programme, which means students who benefited are expected to pay back the loan for the scheme to continue. The question any concerned person would ask is ‘where are the jobs for the graduates that would enable them to repay the loans for the purpose of continuity? I would rather have thought that the government would first find a way to stimulate the economy so as to be able to absorb graduates in gainful employment, whether formally or informally. To the extent of my explanation, I feel the student loan scheme of President Tinubu would go the way of the early one, which packed up in 2002 and nobody has been brought to book. Foremost, the economy should be stimulated to generate job opportunities for graduates.”
Another educationist, Michael Sule said: “The scheme may not stand the test of time as many indigent students may not benefit in the long-run because as usual, it is likely to be hijacked by those in the system and politicians and at the end, the aim would be defeated. The aim is to introduce high tuition fees in the system. The scheme may not work and secondly, we do not have a transparent and corruption-free system in place to implement such a scheme”
There is no doubt that the students’ loans scheme is practiced in several countries of the world, especially in some developed countries. However, despite employment opportunities for students in those climes, it has never been free of challenges, especially the issue of repayment because many end up not repaying. The issue of repayment has been one of the areas of serious concern. The current act requires beneficiaries to start repayment after two years of completion of their national youth service.
Former United States President Barack Obama once said that he only completed the repayment of a student loan he collected before he became a senator.
