University of Nairobi's Sh20 billion debt: Funding gaps, pensions and losses

The University of Nairobi (UoN) is under pressure to produce a clear financial recovery plan after telling Parliament that its outstanding debt has reached approximately Sh20 billion.

Vice-Chancellor Professor Ayub Gitau disclosed the figure before the National Assembly's Public Investments Committee on Governance and Education, which is examining the university's financial position and its ability to meet outstanding obligations.

The institution has also reported an asset base exceeding Sh220 billion, but lawmakers want to know why an institution holding such valuable property is struggling to settle creditors and meet its financial commitments.

The funding gap

One of the explanations offered by university management is a reduction in government funding following the introduction of the Differentiated Unit Cost (DUC) funding model in the 2017/2018 financial year.

Under DUC, university funding allocations were calculated using factors such as student numbers, the courses being offered, staff costs, infrastructure requirements and the cost of running academic programmes.

The Universities Fund explains that the model was designed to allocate funding according to the different costs of university programmes.

However, UoN's acting Director of Finance, Stephen Kimeli, told MPs that the transition created a funding gap of approximately Sh1.6 billion in capitation.

The university says the shortfall affected its ability to finance operations, particularly as payroll costs continued to rise.

The management has also pointed to accumulated deficits and the difficulty of sustaining its large academic and administrative operations with the available revenue.

Unpaid pensions and statutory obligations

The university's financial problems extend beyond routine operating expenses.

During the parliamentary examination, MPs raised concerns about outstanding pension contributions and other statutory obligations.

Delayed remittance of pension deductions can affect employees who expect the money to be transferred into their retirement schemes.

The committee also questioned losses reported by some of the university's income-generating units, which should ordinarily supplement revenue from tuition, government funding and research activities.

Auditor-General reports covering the 2020/2021 to 2024/2025 financial years have also come under scrutiny.

The university's financial statements for the year ended June 30, 2022, received a qualified audit opinion, accompanied by a material uncertainty concerning its ability to continue operating as a going concern.

University officials explained to MPs that the institution had been classified as technically insolvent for the financial year under review because its liabilities exceeded its assets.

This finding relates to the specific audited period; it should not be presented as a new declaration of insolvency in November 2026.

Why Sh220 billion in assets has not solved the problem

The university's reported asset base includes valuable property and other institutional holdings.

However, owning property does not mean an institution has enough cash available to pay salaries, suppliers, pension contributions and other debts when they fall due.

Management told MPs that it was considering ways to generate more income from its property portfolio, including renting and leasing selected assets.

A committee led by the Deputy Vice-Chancellor responsible for finance has also been tasked with examining asset valuations and identifying opportunities to improve returns.

Other recovery measures include increasing student enrolment, reviving commercial units, expanding research activities and tightening expenditure controls.

MPs demand a recovery plan

The parliamentary committee was dissatisfied with explanations that relied largely on austerity measures and the university's property portfolio.

Its members want verifiable financial targets, a clear implementation timetable and practical measures showing how the institution will reduce its debts and settle outstanding obligations.

The university has been directed to submit a report on its proposed recovery measures by December 1, 2026.

For students, employees, suppliers and former staff awaiting retirement benefits, the outcome will be important.

A recovery plan must address not only the university's overall debt but also its ability to meet recurring financial obligations without disrupting teaching, research and other services.