AN ASSESSMENT OF THE PROBLEMS AND PROSPECT OF STUDENT LOAN SCHEME IMPLEMENTATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the study

Student loan programme have developed over many years as governments and educational institutions attempt to tackle the increasing expense of higher education. Traditionally, education has been regarded as a societal benefit, justifying substantial financial support from the government. Nevertheless, the escalating expenses associated with education, fueled by the growing number of students and the proliferation of higher education establishments, have exceeded the financial support provided by the government in numerous areas. The existence of this financial deficit has led to the creation of student loan programmes, which serve as a solution to the financing shortage and enable students to obtain the essential resources needed to achieve their educational objectives (Usher, 2019).

The adoption of student loan schemes is an essential element of higher education financing in several nations, with the aim of increasing the accessibility of tertiary education to a wider population. These schemes attempt to alleviate the immediate financial burden of tuition fees and related educational expenses by offering financial support to students. This, in turn, promotes higher enrollment rates and contributes to the development of a more educated workforce.

Ghana was one of the pioneering African countries to implement a student loan programme in 1971. Unfortunately, this programme was not long-lasting and was abandoned the next year due to a change of government. In 1975, the system was revived with different labels such as 'education credits' or 'repayable financial help' due to the bad association that the word 'loan' had gained in its initial form. Irrespective of the terminology used, the student loan programme was created to encompass various educational expenses such as tuition fees, textbooks, accommodation, and other associated charges (Wilkinson, 2018). 

Nigeria's prior endeavours to offer student loans encountered substantial obstacles. The Nigerian Students Loans Board (NSLB) was established in 1972 with the purpose of providing loans to financially disadvantaged Nigerian students who are pursuing their education within the country (Moses, 2019). The objective was to support students in achieving their educational goals and subsequently repay their loans. The directive was superseded by succeeding ones in 1976 and 1988, which permitted financing for overseas education and resolved the concerns raised in the earlier decrees. 

It is noteworthy that at the initial order, Nigeria had only six universities that were held by the federal government. According to the 1988 order, Nigerian university students were eligible for a maximum loan of NGN1,000 per year, totaling NGN5,000. On the other hand, foreign students may get NGN5,000 to cover their tuition, books, and living expenses. The loan for overseas students had a 7 percent interest rate and a repayment period of 10 years. The repayment was scheduled to occur either two years after graduation or upon obtaining employment, and it necessitated the presence of two guarantors (Moses, 2019: Favor, 2023). Between 1972 and 1992, the NSLB distributed a total of NGN46 million in loans, but only managed to recoup 13 percent of the loan amount. This was a result of deficiencies in the lending system's legislation, administrative and resource obstacles within the NSLB, and cultural elements, such as a lack of motivation to repay loans. In 1993, Nigeria formed the Nigerian Education Bank (NEB) as a replacement for the NSLB in order to address the requirement for easily obtainable financial aid. 

As one of his initial actions as President, Bola Ahmed Tinubu enacted the Students Loans (Access to Higher Education) Act of 2023, with the objective of granting financially disadvantaged students the opportunity to pursue higher education (Premium Times, 2023). The bill proposes the creation of the Nigerian Education Bank, which will have the authority to oversee, coordinate, manage, and monitor student loans in Nigeria. The bank will receive loan applications from students in higher institutions in Nigeria, review the applications to ensure that they meet all the necessary criteria for loan approval under the Act (Chinedu, 2023). The bank is authorized to approve and distribute loans to eligible applicants. It is responsible for managing and overseeing the students' loan account/fund, ensuring that disbursements are made in accordance with regulations. The bank also monitors the academic records of loan recipients to track their graduation year, completion of national service, and employment status. This ensures that loan recipients begin repaying their loans promptly (Felix, 2023). 

The bill stipulates that regardless of any conflicting provisions in other laws, all students pursuing higher education in Nigerian public institutions of higher learning shall have an equitable entitlement to obtain loans under this legislation, without facing any form of discrimination based on gender, religion, ethnicity, social status, or disability (Bamidele, 2023). The measure additionally suggested providing interest-free student loans for the purpose of paying tuition fees at universities, polytechnics, colleges of education, and vocational schools that are founded by either federal or state governments. Eligibility is limited to individuals or families with an annual income of less than N500,000 (US$1,117), encompassing roughly 133 million Nigerians. Applicants must have a minimum of two guarantors. Repayment of the loan must commence two years after the completion of their National Youth Service Corps term. This study will evaluate the challenges and potential of the student loan programme in Nigeria, taking into account the current economic situation. 

Statement of the Problem

Overall, the challenges confronting student financing through loan schemes in Nigeria can be categorized as follows: inadequate financial, human, and material resources resulting from underfunding; loan repayment and recovery, and administration and management (Ojo, 2019)

The evidence (for example from Nigeria, Ghana and Tanzania) shows that in many cases, governments do not allocate sufficient financial resources to enable loans schemes to meet their statutory obligation of issuing loans to needy students. According to Nduka, (2023) the majority of schemes in Africa operate with lean budgets that cannot cover their operational costs and absorb the rising cost of higher education and expanded enrollments in many universities. Inadequate financial resources are largely due to dependence on government funding.

However, Ekwerre, (2019) observed that almost all student loan schemes in Africa suffer low recovery and repayment rates. As Otieno (2023) argues, recovering student loans at full cost is a daunting task for many loans programmes in Africa. With some exceptions, these schemes have limited capacity (in terms of skilled human resources and state-of-the art ICT) to track loan recipients. In some countries, loan repayments are derailed by the lack of a national identification system and recipients’ misconceptions that student loans are government grants because higher education ought to be free. For example, a study by Ishengoma (2021) on students’ attitudes towards cost sharing through loans revealed that they were unwilling to repay their student loans because they considered higher education as a basic right which should be paid for by the government.

Observation and documentary evidence show that top managers and administrators as well as employees of most student loans schemes are not professionals trained in disciplines relevant to student financing (Owieno, 2017). For example, one of the longest serving top administrators of a student loans scheme in one of the countries mentioned above trained as a linguist. In Tanzania, the chief executive officer and chairperson of the board of directors of the HESLB are presidential appointees. This implies limited independent decision-making and vulnerability to political pressure and manipulation to make decisions that favour the establishment or the ruling party (Nganga, 2020). While this is not to suggest that professional training in loans schemes management and related disciplines is a guarantee of efficient functioning, it is believed that it is a sine qua non for any successful and sustainable student loans scheme worldwide

Moreover, the Academic Staff Union of Universities (ASUU), an organisation that represents Nigerian public university lecturers, has doubts about the practicability of the new scheme due to the country’s high rate of graduate unemployment. (ASUU, 2023). Nigeria's Punch newspaper reports that approximately 40 per cent of those holding a Bachelor's degree and 59 per cent of those with Higher National Diplomas are currently unemployed. Also, the renowned global tax and audit services firm, KPMG, projects that Nigeria’s unemployment figure will rise to 40.6% in 2024, from 37.7% in 2023. With the current economic conditions in Nigeria, a student loan scheme will create more problems than the ones it is attempting to solve, said Prof. Emmanuel Osodeke, the President of ASUU hence the need for this study.

1.3 Objectives of the study

The primary objective of this study is to assess the problem and prospects of student loan implementation in Nigeria. Specific objectives of this study are to:

To assess the level of awareness about student loan schemes among tertiary institution students.

To find out the factors that influence the acceptance of the loans by tertiary institution students.

To analyze the effects of student’s loan scheme implementation in Nigeria.

To examine the challenges of the loan scheme implementation in Nigeria.

To explore the strategies for improving the loan scheme implementation in Nigeria

1.4 Research Questions

The following research questions will be answered in this study:

What is the level of awareness about student loan schemes among tertiary institution students?

What are the factors that influence the acceptance of the loans by tertiary institution students?

What are the effects of student’s loan scheme implementation in Nigeria?

What are the challenges of the loan scheme implementation in Nigeria?

What are the strategies for improving the loan scheme implementation in Nigeria?

1.5 Research Hypotheses

The following research hypothesis will be validated in this study:

Ho: The level of awareness about student loan schemes among tertiary institution students is low.

Ha: The level of awareness about student loan schemes among tertiary institution students is high.

1.6 Scope of the study

Broadly, this study focuses on problems and prospects of student loan scheme implementation in Nigeria. Specifically, this study focuses on assessing the level of awareness about student loan schemes among tertiary institution students, the factors that influence the acceptance of the loans by tertiary institution students, the effects of student’s loan scheme implementation in Nigeria, the challenges of the loan scheme implementation in Nigeria and the strategies for improving the loan scheme implementation in Nigeria.

This study will be carried out in University of Lagos, Nigeria.

1.7 Significance of the study

The results of this study have the potential to be widely applicable, not only in Nigeria but also in informing worldwide standards for educational funding. 

This research will also help to uncover the precise obstacles that are impeding the successful execution of these programmes. By doing so, it can provide policymakers with valuable insights into the necessary changes and enhancements required. This will help ensure that the loans are effectively distributed to the intended recipients and are managed in a sustainable manner.

Finally, this study will also serve as a reference material to students and researchers for further studies and future research.

1.8 Limitations of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that there are no much data on the topic of problems and prospects of student loan implementation in Nigeria and the parameters for measuring it in relation to whether it affects students positively or negatively. Thus, much time and organization was required in sourcing for the relevant materials, literature, or information and in the process of data collection. Also the study is limited in sample size and geography covering only a part of Nigeria. Therefore, findings of this study cannot be used for generalization thus creating a gap for further studies. 

Also encountered was time constraint as the researcher had to carry out this research in addition to attending lectures and other educational activities required of him.

1.9 Definition of terms

Loan: a loan is the transfer of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money.

Student loan: A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses

Scheme: Scheme is a large-scale systematic plan or arrangement for attaining a particular objective or putting a particular idea into effect.

Implementation: Implementation is the execution or practice of a plan, a method or any design, idea, model, specification, standard or policy for doing something. As such, implementation is the action that must follow any preliminary thinking for something to actually happen.

Student Loan Scheme: A Student Loan Scheme is a financial assistance initiative specifically created to assist students in covering the costs of their education. This programme often provides loans with advantageous conditions, such as reduced interest rates and adaptable repayment schedules, to finance tuition fees, textbooks, living expenses, and other educational expenditures. Typically, the government, banks, or other financial entities offer loans to students. Repayment typically starts when the student finishes their study and finds employment.