Paying for Lunch: How Nigeria can Finance its Multi-Billion Naira School Feeding Initiative and Why it's a Worthy Investment

               Photo from Mail & Guardian Flickr

              Photo from Mail & Guardian Flickr

Nigerian President Muhammadu Buhari’s promised school feeding program, which seeks to provide one meal a day to all of the nation's primary school children, will require tens of billions of naira annually (USD billions) to cover costs of food, distribution, and administration. The investment is a worthy one, with returns expected in the form of social dividends and much-needed private sector growth fueled by government spending. In fact, according to the World Food Program, countries that implement school feeding enjoy a 1:4 cost/benefit ratio on average, thanks to increased productivity, asset generation, and higher wages associated with educational benefits. Returns notwithstanding, few countries possess the resources to fund a national school feeding initiative outright, and Nigeria is no exception. And while many countries implement school feeding with substantial donor support, Nigeria's receipts of Official Development Assistance (ODA) are modest. This compels the Federal Government (FG) and states to get creative about how it will pay for lunch – more accurately, 20-30 million lunches – each day.

4:1 Benefit to Cost Ratio of School Feeding Programs, Globally

Vice President Osinbajo, who’s been tapped to lead the initiative for the FG, estimates the national school feeding agenda will attract 980 billion naira (USD $5 billion) in private investment. While critical, most of this will go to businesses on the supply-side of the program, begging the question: “Where will FG and state procuring agencies find the money to buy goods and services for school meals?” On top of food and distribution, there’s the cost of administration, which averages 20-30% of the total that governments must spend to make school feeding programs run, according to global case studies.

Nigeria’s FG is likely to finalize its 6 trillion naira budget for FY16 this month with an estimated 500 billion naira (USD $2.5 billion) allocated for social welfare, from which the school feeding initiative must draw. States, particularly those selected as pilot school feeding states for 2016, must also budget for their share of the tab. But with falling oil prices, slowed growth, and past losses from abuse and theft of public funds, government coffers will undoubtedly come up short. At the same time, development finance institutions like the African Development Bank and the World Bank will expect to see how the FG and states are optimizing their own and other sources of capital before issuing new loans for this agenda.

All this is to say that the bill for school feeding is steep and finding the money for it will not be easy, but it is possible and very much worth the effort. What’s needed is a bespoke public financing strategy, synchronized at the FG and state levels, which optimizes cash-on-hand, capital-on-credit, public and private resources, with conventional and innovative models. Motive International believes the following four-pronged strategy may be just the solution:

  • One:        States and the FG should establish public-private partnerships (PPPs) and encourage private sector investment and lending into value chains aligned to school feeding goods and services. Smart capital injections in the right places will lower overall costs of school feeding, thereby reducing the total financing burden. Fortuitously, Nigeria’s own Bankers’ Committee announced this week their goal of issuing 300 billion naira (USD $1.5 billion) in loans to agricultural small and mid-sized enterprises (SMEs) in 2016. This pledge of capital is welcome and needed. 
     
  • Two:        The FG and states should harness new streams of revenue tied directly to the economic growth that school feeding will help fuel. Domestically mobilized resources are the most vital yet currently under-tapped source of capital for such initiatives, a sentiment wisely touted by leaders such as Lagos State Governor Akinwunmi Ambode. Government needs to collect more revenue – especially from non-oil sectors – to pay for essential public goods and for the next two elements listed below.
     
  • Three:      States and the FG should leverage innovative instruments such as impact bonds, which tap into private capital markets by linking school feeding targets to future returns on investment. If successful and brought to scale, Nigeria could be a global pioneer in the impact bond space, using school feeding as a springboard. Lagos State, with strong fiscal health and dynamic leadership, make it an ideal state to embrace such innovation.
     
  • Four:        States should apply for, and the Federal Ministry of Finance should support, carefully structured development bank loans to finance discreet elements of the program. A clear implementation plan that defines FG and state roles and responsibilities in school feeding must precede any loan application.

With just nine months before the start of the 2016 school year, and in the midst of budget season, the time for fleshing out and executing a financing strategy for school feeding is now. Fortunately, Nigeria can capitalize on the current rise in global investor interest in the country, thanks to the Administration’s promise of a less corrupt political economy, and seize the current window to engage prospective impact bond and PPP backers. It can also take advantage of new findings emergent from the July 2015 Financing for Development conference in Addis Ababa, and the broader momentum of the Sustainable Development Goal (SDG) agenda, when engaging development banks and the private sector alike. This timely moment, coupled with Nigeria’s market sophistication, under-tapped tax base, and political resolve around school feeding, provides every opportunity for the FG and states to mobilize funds for this pricey, but transformative, agenda, and smartly pick up the tab for lunch.