UoN secures Sh3.8bn loan amid cash flow crisisTuesday February 08 2022
The University of Nairobi has secured Sh3.88 billion (30 million Euros) from a French financier for the construction of its Engineering and Science complex.
Treasury documents tabled in Parliament show the loan from the Agence Francaise De Development was approved in October last year, giving the university a boost in efforts to improve learning facilities amid cash-flow challenges.
“The loan will be used to build and operate an engineering and science complex (ESC) at the University of Nairobi with the main goal being to increase student capacity up to plus 20 percent, better the faculty-student ratio and curve down the drop-out rate,” the documents read in part.
The loan was signed on October 29, 2021, between Agence Francaise De Development as the lender and the Government of Kenya as the borrower.
The UoN has been grappling with a cash-flow crisis due to a drop in the number of self-sponsored students and government funding, hurting efforts to upgrade its infrastructure and attract students locally and from outside the country.
UoN will enjoy a seven-year grace period on the loan until the end of April 2029 and is expected to end twelve years later.
“The interest rate of the loan is 0.25 per cent per annum and a margin of 1.06 per cent and commitment charge rate is 0.5 per cent per annum,” the Treasury said.
Funding for the UoN just like other universities has been hit by a sharp fall in the number of self-sponsored students in recent years due to a drop in the number of students scoring the mandatory C+ grade in KCSE.
This has resulted in a build-up of pending bills, a freeze on hiring and stalled projects.
Stalled projects at the UoN include the proposed School of Pharmacy whose construction commenced in 2011 but is currently 16 percent complete due to lack of government funding.
Construction of the proposed halls of Residence at UoN Lower Kabete campus whose construction started in 1990 stalled at 58 percent due to lack of funding.
UoN Vice-Chancellor Stephen Kiama said last year that the institution faces student accommodation challenges.
“Of our 55,000 students, we are only able to accommodate slightly more than 10,000. So the other 45,000 have to find spaces all over town,” he said.
Aside from infrastructure challenges, the UoN is struggling to honour obligations such as payroll taxes, retirement benefits and insurance premiums for employees.
It has outstanding remittances to the Kenya Revenue Authority (KRA), the National Hospital Insurance Fund (NHIF), the National Social Security Fund (NSSF), pension schemes, insurance companies, Saccos and banks.
In November last year, Treasury revealed that the University of Nairobi (UoN)and Kenyatta University (KU) had dipped into a combined Sh4.3 billion financial deficit in the year ended June 2021.