Nigerian Student Loan: The Good, Bad, and the Ugly

President Bola Tinubu’s led Federal Government of Nigeria on June 12, as part of the country’s 24th Democracy Day celebration, signed the “Student Loan Bill” into law in fulfillment of his campaign promises, a gesture that gained nods from Nigerians, especially low-come earners This means that an average family in Nigeria could now boast of a graduate going forward. This is good news. But one of the unanswered questions is, “What would be the yardstick to measuring family income inquest to determining eligibility?

However, in primary economics, every policy has both a demand and supply side. Just like the anticipated benefits of having a Student Loan, the demand such policy would impose on the government and the labour market should not be underestimated.

The Good

Some of the advantages of Nigeria Student Loans could include increased access to education, especially for the ‘poor’ Nigerians who have lost hope of achieving their dream of having a university education due to their inability to afford the fees. 

Secondly, the beneficiary would enjoy an interest-free loan for a minimum of six years, in an environment where the cost of borrowing is on the high side.

Thirdly, there is a flexible payment method. The loan, according to the federal government, would be deducted from the beneficiary’s salary. The employer would be mandated to remit 10% of the beneficiary’s salary for loan repayment. But what if the beneficiary decides not to work for an employer?

From an economic point, the policy would lead to cheap labour. When the supply of labour exceeds the demand (which is currently the state of the Labour Market), employees would be forced to accept any wage offered by the employer.

The Bad

Some experts are worried about government involvement in activities like Loans and recovery, especially, when considering past records.

Some of the disadvantages could stem from the government’s inability to implement and monitor the processes from when a load is disbursed and when it is supposed to be recovered.

-If the government is not able to recover the loan, it would result in a loss of revenue for the government.

-A greater percentage of the loan may be lost, as some beneficiaries may see it as their own share of the national cake.

– If the responsibility of paying back the loan is hung on the shoulder of the employer, what if the beneficiary is unable to secure meaningful employment that can help him carter for his immediate needs, family, and the loan, considering the current level of unemployment and underemployment in Nigeria.

The Ugly

One may favorably argue that the policy would increase unemployment by increasing the labour supply in an economy with limited job availabilities for its growing population. Currently, Unemployment (33.3%), Underemployment (22.8%), Youth Unemployment (42.5%), and Youth Underemployment (21.0%), is already worrisome situation. An increase in the labour supply without an elastic response in job creation would increase unemployment. When this is the case, the policy objectives would be endangered.

-Considering the ‘Japa’ syndrome in Nigeria today, what if a beneficiary decides to seek greener pastures outside the country, how can the loan be recovered?

One may also be eager to know the plan of government in the case of drop-out or death of the beneficiary.

What should the Government do?

No doubt, Student loans increase the number of university applications, and increase the number of graduates annually. The development would also require more staff (both academic and non-academic staff), hence, the government’s expenses would also increase in that regard.

For the government to accommodate the demands of the policy, there is a need to increase the number of public universities in Nigeria, both at the federal and state levels. Currently, the number of universities in Nigeria is estimated at Two Hundred and Fifty-Eight (258), comprising 50 federal universities, 60 state universities, and 148 private universities.  This number may not be enough to douse the tension that may result from the Student Loan Policy. In building more universities, the government can go into Public-Private-Partnership (PPP).

Consequently, the Jamb admission quotas would need to be raised to accommodate more applicants, as the policy would likely encourage more applications for university studies.