DEVELOPMENT - 05 NOV 2019

The challenge of funding healthcare in Nigeria

The challenge of funding healthcare in Nigeria
Healthcare remains a problem across Nigeria. Source: NACA Nigeria Hospital

Is ₦427 billion enough?

Definitely not enough to address healthcare in the most populous Sub-Saharan nation.

Nigeria’s federal government has set aside ₦427 billion to finance the health sector in 2020, up from ₦365 billion in the previous year. Despite this increase, health spending is barely 4.5% of the government’s budget and significantly below the 15% benchmark set by the African Union in 2001 to promote healthcare delivery across the continent. 

The story is similar at the state level. While states like Bauchi, Kano, and Kwara allocated over 12% to health in recent years, the average state’s allocation was consistent with the federal government’s.  

Here’s another way of looking at it:

According to the World Bank, Nigeria’s total health expenditure (both private and public healthcare spending) amounted to 3.6% of GDP in 2016, and below peers like Kenya (4.5%), South Africa (8.1%), and Brazil (11.7%). This low healthcare-to-GDP spend helps explain the prevalence of poor health outcomes in Nigeria. In the Economist Intelligence Unit 2017 Access to Healthcare Index, Nigeria ranked 55 out of the 60 countries surveyed on the ease of citizen access to quality healthcare services.

The country can point to big-ticket wins like the being declared polio-free earlier this year and the successful aversion of an Ebola epidemic in 2014. Yet such stories are outpaced by endemic public health concerns like the 821 women (per 100,000) that die during childbirth or the 6000:1 patient:doctor ratio the country boasts, ten times the World Health Organisation recommended ratio.

The enactment of a higher minimum wage at a time when public finances are hanging on a thread means that the growing financial demands of the health sector must be met in other ways. Budget funding is simply inadequate.

 

The Limit of Government's Will

Government interventions have failed to address the challenges confronting the health sector. For instance, the National Health Insurance Scheme (NHIS) was established to promote affordable healthcare to Nigerians. 20 years down the line, three-quarters of health spending in the country was out of pocket payments made to health providers. When combined with Nigeria’s high unemployment and income volatility, medical challenges quickly become financial crises for many people.  

The failure of the National Health Insurance Scheme lies in its ambitious but muddy vision of providing effective healthcare services to Nigerians without a clear path to actualisation. At inception, there was no clear onboarding plan for Nigerians in the informal sector, a segment of the economy that could be as much as two-thirds of the formal sector. No surprise then that less than 1 in 20 Nigerians has access to the NHIS scheme, compared to 69% in similar government-operated schemes in Ghana and Kenya.

One fatal flaw of the NHIS scheme is its unclear funding arrangement. Allocation of funds to the scheme is discretionary with direct funding from the central government revenue account, while premiums paid by those enrolled do not account for peculiar health risks and needs. As a result, healthcare maintenance agencies operating under the scheme are financially indebted to healthcare providers as a result of the government’s inability to meet its obligations.

Incessant pleas for funds on social media by terminally ill Nigerians and the limited health insurance coverage among blue-collar professionals are testaments of a failing initiative.

The need for private sector-driven healthcare reform is urgent. Asides the financial constraints the government faces, there are administrative and innovative worries. For instance, the National Health Care Act was signed into law in 2014 to set standards for rendering health services in Nigeria but was only implemented in 2018.

 

Nigeria's healthcare needs private capital

Across the World, private sector-led investment is shaping healthcare outcomes. Investors are attracted to the sector due to rising demand in both developed and developing countries, and limited exposure to economic shocks. Global consulting giant Bain in its 2018 Healthcare report, disclosed that the total deal value in the healthcare industry in 2018 was $63.1 billion, up from $42.6 Billion in 2017.

The compelling case for investment is especially true in growing economies. At the end of 2018, TPG, a global private equity firm, had an investment exposure of $600 million in India’s health sector, with a sizeable part in diagnostics centers and healthcare infrastructure. Development finance institutions are also in on the act. The International Finance Corporation, through its Africa Healthcare Fund, recently partnered with a group of investors for a $67 million investment in one of Nigeria’s leading healthcare providers.

Notwithstanding that investment, Nigeria is not an investor’s preferred choice. Going by recent foreign direct investment (FDI) numbers, countries like Egypt get nearly four times as much FDI as Nigeria.

 

India Paths?

Nigeria’s biggest selling point is arguably the long-term growth potential of an essential service in a country with a substantially large market and diverse population. Nigerians reportedly spend ₦400 billion on medical tourism and a similar amount importing foreign pharmaceuticals each year. Even with high poverty levels, such figures indicate the presence of a capturable market in particular health segments.

The pharmaceutical segment of the nation’s healthcare industry might be a good take-off point for investors. India offers a useful case study here, as the Asian giant grew its $35 billion pharmaceutical industry with a large helping of foreign investment over the years, as well as strategic partnerships in the vaccine value chain. The government was at the center of this transformation, as it focused on making the Indian market viable for investment. They launched a Pharma vision 2020 aimed at making India a global leader in end to end drug manufacturing, and one of the key initiatives was permitting 100% foreign ownership in the sector.

How can Nigeria replicate this success?

There are a few tried-and-trusted ways of attracting investment. Granting tax breaks, favourable patent legislation, streamlining bureaucracy, etc. Also, resolving the perpetual insecurity and the uncertainty of the current foreign exchange policy would go a long way. Finally, cracking down on fake drugs would provide a solid platform for manufacturers to build out a market. To hedge the risk of investors the country can take a clue from India’s whose comprehensive healthcare public-private partnership arrangement is driving access to healthcare through various models that are being executed across the healthcare value chain.

Africa’s largest economy’s healthcare sector needs private sector funding. Healthcare needs are rising just as resources become thinner. Enticing private capital ought to be health priority number one for Nigeria.

Follow this Writer on Twitter @fadeseretobi. Subscribe to read more articles here.

 

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