Education Loan For Students By President Tinubu
By Aare Afe Babalola SAN
It was a great relief to many, including students, parents and lovers of education generally when on June 12, 2023 President Bola Tinubu signed the Students Loan (Access to Higher) Bill into law.
Those who have been following my weekly write-ups do know the premium I put on education. Education is the catalyst to all round development through which one can overcome ignorance, tribalism and poverty.
As far back as 2018, I have written series of articles urging the Federal Government to reestablish education bank.
As far back as 1993, the Federal Government had established what was then known as Education Bank.
The Education Bank was set-up to provide loans to students. The bank was designed to replace the former students’ loan board.
By virtue of section 7 of the Nigerian Education Bank Act, Cap N104, Laws of the Federation of Nigeria, 2010, the bank was saddled with the following functions:
Functions of the Bank
The functions of the bank shall be to:
(a) approve and disburse loans for educational purposes;
(b) provide loans to students to finance their education in institutions of higher education;
(c) recover loans disbursed under this action;
(d) provide short-term loans to individuals or other bodies in appropriate cases, if it is satisfied –
(i) that the purpose for which the loan is requested is viable and would enhance the educational development of Nigeria; and
(ii) that there is adequate security for the loan;
(e) promote the mobilisation of savings and grants from the public and private sections for educational investments;
(f) accept deposits from individuals, institutions and organisations to finance educational investments;
(g) provide financial advice an educational matters to institutions of higher education, and to parents, students and educational investors;
(h) engage and participate in other banking business, including lasing, fund and management, foreign exchange and letters of credit;
(i) promote the development of viable research, consultancy services and relevant ventures within institutions of higher education and research institutes and centres;
(j) aid authors by providing them with forms for the purpose of financing the printing and publishing of educational books; and
(k) do anything or enter into any transaction which in the opinion of the Board is necessary to ensure the proper performance of its functions under this Act.
By virtue of Section 4(2) of the Act, the Bank was to be administered by a Board of Directors, the composition of which was as follows:
(2) The Board shall comprise –
(a) a part time chairman to be appointed by the President;
(b) the Managing Director of the bank
(c) the Permanent Secretary of the Ministry of Education or his representative.(d) one person to represent the Ministry of Finance
(e) three persons to represent the share-holders in proportion of their shareholding in the bank
(f) the Executive Directors of the Bank; and
(g) three other persons who, by reason of their character and experience in matters relating to education, banking, accountancy, law, finance or economics, are in the option of the Minister suitable for appointment as members of the Board.
(3) The members of the Board shall be paid such allowances as the Bank in a general meeting may, from time to time, approve.
(4) The provision of the Schedule to this Act shall have effect with respect to the proceedings of the Board and the other matters mentioned therein.
Again by Section 8 of the Act, the Board was saddled with the following functions:
Functions of the Board
The Board shall, subject to the general direction of the Minister, be responsible for:
(a) managing and superintending the affairs of the bank;
(b) for the overall policy and general administration of the bank;
(c) formulating policies and guidelines for operating the loans from the bank and ensuring their implementation;
(d) working closely with the management of the bank to ensure smooth operation of the affairs of the bank;
(e) deciding on and approving the borrowing power and credit limits of the bank;
(f) approving annual reports and statements of accounts of the bank;
(g) appointing and approving fees for external auditors; and
(h) carrying out such other activities connected with or incidental to the other functions of the Board.
While the Bank could by virtue of Section 16(1) charge interest on loans disbursed by it at the prevailing commercial rate in the country, Section 16(2) nevertheless provided that the rate of interest on loans granted to students shall be subsidised by the Federal or State Governments to such extent as may, from time to time, be agreed upon by the Minister and the Board.
A careful examination of the above provisions readily reveals that it was the intention of the lawmaker that the Board of the Bank would play a very important role in the achievement of the functions of the bank which for the sake of emphasis was to provide much needed funding, in the form of loans to the educational sector.
Regrettably the Bank failed woefully in the discharge of this functions leading to the decision of the Federal Executive Council in 2000 to set up a Ministerial Committee to wind up the Bank.
The Committee itself was inaugurated on May 23, 2001. The Committee at the end of its assignment submitted a report, which contained certain recommendations to the government. It is from the resultant White Paper that one can understand just why laudable ideas just do not appear to work in Nigeria.
Firstly, it was revealed that the government which had put in place the legal frame work for the establishment of the Bank, which as stated above, required the composition of the Board of Directors, failed totally to put in place a board right from the inception of the Bank in 1993. This led to the decision of the government to wind it up in 2000.
Thus government was majorly responsible for the failure of the bank to carry out its statutory duties. In this respect, the White Paper stated as follows:
“The Edubank had no Governing Board since inception in 1993, so the Honourable Minister of Education acted in place of the Board throughout”.
It is, therefore, beyond dispute that government itself, by its failure to set up the Board, allowed the bank to fail. As provided in Section 8, the Board was supposed to carry out its several functions including managing the affairs of the bank subject to the supervision of the Minister.
However the Minister ended up managing the affairs of the bank without any supervision. The effects of this, as I will show next week from the very findings of the ministerial committee, were profound.
I examined the provisions of the 1993 Education Bank Law and how the bank folded up due mainly to the failure of the government to set up the governing board for the bank contrary to the express provisions of the law setting up the bank.
This week, I intend to examine the Government White Paper on the recommendations of the Ministerial Committee and other factors that contributed to the demise of the bank.
It was found that a total of 225 members of staff who were on the payroll of the bank were civil servants who failed to follow the civil service rule. Most of them were appointed, transferred, seconded or promoted as members of staff of the bank. Some of them were not promoted for a long time. It was also found that a total of 49 members of the staff were current pensioners and six were classified as pensioners outside unified pension scheme.
The board was found to have approved the transfer of N75million capital grant from the loans fund for investment in a mortgage finance house which was in distress to the detriment of the primary objectives of the bank law.
It was also found that the bank area offices tampered with recovered loans. As at 10th October, 2001 the bank had no additional records of loans balances in the CBN and commercial banks.
It is clear from the above that as has been the case with virtually anything Nigerian, the “Nigerian factor” was brought to bear on the Education Bank.
However, despite the identified flaws in the operation of the bank, and the resultant decision of the government to wind it up, I still remain of the firm conviction that there is a need for a student loan bank.
I am also of the view that the problems faced by the 1993 Education Bank should guide the new Education Loan Law approved by Tinubu government.
This new law on Students’ Loan is headed Students Loans (Access to Higher Education) Act, 2023. It contains explanatory memorandum which states as follows:“This act provides easy access to higher education for Nigerians through students’ loan with a view to providing education for all Nigerians”.
The Students Loans (Access to Higher Education) Act, 2023 is said to be: “ABill for anAct to repeal the Nigerian Education Bank Act Cap. N104, Laws of the Federation of Nigeria, 2004 and enact the Students Loans (Access to Higher Education) Act, 2023 to provide easy access to higher education for indigent Nigerians through interest free loans from the Nigerian Education Loan Fund established in this Act with a view to providing education for all Nigerians; and for related matters”.
Section 2 of the Law provides as follow:
“Subject to the provisions of any other enactment, all students seeking higher education in any public institution of higher learning in Nigeria shall have equal right to access the loans under this Act without any discrimination arising from gender, religion, tribe, position or disability of any kind”.
However, Section 14 restricts access to the Loan to Students who have secured admission into Nigerian universities, polytechnics, college of education or any vocational schoolestablished by the federal government or the government of any state of the federation.
In other words, students in private university are excluded from obtaining loans for education under this law. For avoidance of doubt, paragraph 14(a) of the law provides as follows:
14(a) applicant must have secured admission into any of the Nigerian universities polytechnics, colleges of education or any vocational school established by the Federal Government or the Government of any state of the Federation.
I am of the firm view that Students Loan should be available to all students to pay for university tuition, books and living expenses. It is to me discriminatory and unjust to exclude students in private higher institutions from benefiting from the loan.
Experiences in other climes
In Australia, for instance, tertiary education is usually funded through the HECS-HELP scheme which is in the form of loans that are not normal debts and are paid over time via a supplementary tax, using a sliding scale based on taxable income.
The import of this scheme is that loan repayments are only made when the students have graduated and have income to support the repayments. The debt does not attract normal interest.
In the United Kingdom, students’ loans are primarily provided by the state-owned Students’ Loan Company. But unlike what obtains in Australia, interest begins to accumulate on each loan as soon as the student receives it, but repayment is not required until the start of the next tax year after the student either completes or abandons his education.
Since 1998 for example, repayment has been collected by HMRC via the tax system and are calculated based on the borrower’s current level of income. If the borrower’s income is below a certain threshold 15,000 British Pound Sterling per tax year for 2011/2012, 21,000 British Pound Sterling per tax year for 2012/2013, no repayments are required, though interest continues to accumulate.
In the United States of America, there are two types of students’ loans: federal loans sponsored by the federal government and private loans which broadly includes state-affiliated non-profit institutional loans provided by schools. Interest does not accrue on subsidized loans while the students are still in school. Students’ loans may be offered as part of a total financial aid package that may also include grants, scholarships and/or work study opportunities.
The Korean experience is not substantially different from what has been discussed above. For instance, Korea’s students’ loans are managed by the Korea Students Aid Foundation, KOSAF, an institution committed to talent cultivation in charge of student aid and established in May 2009.
It is instructive to note that Korea has an ingrained philosophy that the country’s future depends on talent development and so no student is permitted to quit studying due to financial reasons as a result of which Korea makes deliberate efforts to help students grow into talents that serve the nation and society as members of the Korean society.
Through the management of Korea’s national scholarship programmes, students’ loan and talent development programmes, KOSAF offers customized students’ aid services and students’ loan programme.
It is a painful truism that our economy has not been as healthy as expected. It is therefore no small wonder that Nigeria has not been able to commit 26% of its resources to education as recommended by UNESCO. As a matter of fact, more of the country’s resources have been committed to defence because of the prevailing insecurity in the country as a result of which education is unduly suffering an underserved under-funding.
There is endemic and grinding poverty all over the country and this is largely because the government spends a lot on other areas and particularly as Nigeria depends on oil as its sole source of income. For example, there are no industries and so there are no opportunities for employment and it is industries that employ most students coming out of universities and not government.
But then, it must be appreciated that quality education requires good schools, good and well equipped laboratories, good equipment, highly qualified and committed teachers to pave way for proper education that can only come to the fore where talents are expeditiously harnessed.
It is apposite to say that government should be able to provide these facilities even if students have to pay school fees to ensure a proper maintenance of these facilities. Consequently, government needs to adopt a school fee-paying system backed up with loan system which would enable students to pay fees.
