For millions of Nigerians operating at the base of the economic pyramid, illness is no longer just a health challenge. It has become an economic risk factor capable of disrupting livelihoods, wiping out working capital, and in many cases, shutting down small businesses entirely.
In a country where daily income sustains both households and enterprises, the cost of accessing healthcare is increasingly emerging as one of the most underestimated threats to economic stability. What begins as a medical issue often evolves into a financial crisis that small business owners struggle to recover from.
Across Nigeria’s informal economy, which accounts for the bulk of employment and a significant share of national output, the absence of adequate financial protection against health shocks has left millions exposed. Without insurance coverage or savings buffers, even minor illnesses can trigger a chain reaction of economic distress.
Analysts say this reality is not just a social welfare concern but a structural economic constraint. When small entrepreneurs are forced to divert business capital to pay hospital bills, the consequences extend far beyond individual households. Cash flow disruptions, reduced reinvestment, and stalled business expansion collectively weaken productivity and slow down broader economic growth.
The pressure is intensifying against the backdrop of rising healthcare costs. Data from the National Bureau of Statistics shows that health inflation rose to 28.62 percent in February 2026, up from 19.58 percent recorded in the same period the previous year. The increase reflects higher costs of drugs, consultations, and hospital services.
At the same time, Nigeria’s health financing structure remains heavily dependent on direct payments from households. More than 70 percent of total health expenditure is still paid out-of-pocket, leaving individuals to bear the full burden of medical costs at the point of need.
Health insurance coverage, meanwhile, remains low. Estimates show that only between 13 and 19 percent of Nigerians are covered in 2026, despite ongoing reforms aimed at expanding access.
The federal government has set a target of achieving 50 percent coverage by 2030 under its health financing strategy. However, progress has remained uneven, with millions still operating outside formal protection systems.
Although the National Health Insurance Authority Act of 2022 made health insurance mandatory for all Nigerians and legal residents, implementation has not matched policy ambition. Between 2022 and 2025, only about 22 million people were enrolled, representing roughly 10 percent of the population.
This leaves a vast majority exposed to unpredictable health spending that can quickly escalate into financial distress.
The informal economy at the centre of the risk
The impact of this gap is most visible within the informal sector, which remains the backbone of Nigeria’s labour market. Speaking during a televised interview, Fejiro Chinye Nwoko, managing director and chief executive of the Nigeria Solidarity Support Fund, explained that the structure of this sector makes it especially vulnerable to health-related shocks.
Nwoko noted that more than 80 percent of employed Nigerians operate within the informal economy, which contributes up to 40 percent of national GDP.
That scale, she said, makes it impossible to ignore in any serious discussion about economic resilience.
However, unlike formal sector workers who often have access to structured salaries and insurance benefits, informal workers rely on daily earnings. Savings are limited, income is inconsistent, and financial buffers are often non-existent.
According to her, this creates a situation where illness does not only affect health but immediately disrupts income generation.
“These people earn their income daily and most of the time, especially for very small businesses, they live from income to income. They don’t have much savings. So once there is a health-related financial shock, it eats into their business capital and that can lead to temporary or permanent shutdown of the business,”Nwoko said.
Medical bills become business losses
The real cost of illness, she explained, is often underestimated. It is not just the hospital bill but the opportunity cost of lost business activity and depleted working capital.
To illustrate, she described the situation of a petty trader earning about ₦10,000 daily. Even a relatively minor illness can quickly become financially destabilising.
“For example, a petty trader who earns maybe ₦10,000 a day, for an average primary health illness, you can be spending up to ₦50,000 to ₦100,000. If we talk about admissions, it is going to be two times that. If you talk about surgery, then it runs into millions,” she explained.
In many cases, such expenses force entrepreneurs to liquidate stock, borrow at high interest rates, or pause operations entirely. Recovery is not guaranteed, and many businesses never return to their original level of activity.
Productivity, inflation, and the wider economy
She drew a direct line between health security and macroeconomic stability, noting that productivity remains central to economic growth. If a large portion of the population is vulnerable to health shocks, then the stability of national output becomes uncertain.
According to her, the impact is not confined to individual enterprises but spreads across interconnected value chains that sustain both formal and informal economic activities. She noted that informal operators are deeply embedded within supply networks that support larger industries, including oil and gas, manufacturing, agriculture, and even government-related services.
“There is a lot of supply chain that is associated with the informal sector. So even if it’s the formal sector, there’s a lot of informal sector supporting big businesses, oil and gas, even government businesses. And once that disruption happens along that chain, it’s not just them that are impacted, it affects the formal sector as well,” she explained.
This interconnectedness, she argued, explains why inefficiencies in the informal sector often translate into higher costs across the economy. Disruptions in production and distribution, particularly in essential goods such as food, create inconsistencies in supply that ultimately affect pricing.
For instance, she pointed to disparities in commodity pricing across regions, noting that production zones do not always reflect consumption market prices due to transportation, packaging, and logistics challenges. When health-related disruptions affect any part of this chain, the ripple effect is felt in retail markets and export capacity.
“So that is why a lot of times we’re paying so much more for things because of the inconsistency in supply chains,” she said, adding that if that sector doesn’t function optimally and consistently, then we begin to have inconsistent supplies and it affects even our GDP”
From her perspective, the broader implication is that health shocks do not only reduce individual productivity but also weaken national competitiveness in trade and production.
The structural barriers to protection
Despite policy reforms, expanding health insurance coverage has remained difficult. Experts say the challenge is not only structural but behavioural.
According to her, the issue is not driven by a single factor but by a combination of awareness gaps, trust deficits, and structural limitations in payment systems and product design.
“Most things in Nigeria are multifactorial. First is awareness. People really don’t understand how health insurance works. And something you don’t clearly understand, you can’t buy into,” she said.
Nwoko noted that many informal workers lack clarity on how insurance functions, particularly the concept of pooled risk, where contributions from many people are used to support the few who require care at any given time.
She stressed that proper sensitisation is critical, not only to explain benefits but also to clarify limitations of coverage so that users understand what is included in their insurance package before accessing care.
“People need to understand their benefits package and what it will not cover, so when they go into the hospital, they are not in shock,”Nwoko said.
Beyond awareness, she identified trust as another major barrier. Many informal sector operators, she noted, prefer to retain personal savings for medical emergencies due to past negative experiences or scepticism about system efficiency.
“Some people have had bad experiences and feel like they can’t trust the system,” she said.
A third challenge, according to her, is affordability and payment flexibility. Given the irregular nature of informal income, many workers struggle to commit to annual premiums or rigid payment structures commonly found in existing insurance schemes.
“Income is quite inconsistent and unpredictable. So a lot of health insurance packages are not flexible enough for this group, especially low-income earners who cannot pay annual subscriptions,” she noted.
What needs to change
According to Nwoko, addressing these gaps requires coordinated action across government, private sector players, and civil society organisations.
She described the government as the primary driver of policy enforcement, particularly in ensuring that health insurance mandates are implemented effectively. While reforms under the National Health Insurance Authority have been introduced, enforcement remains a weak point.
For the private sector, she called for innovation in payment systems and product design tailored to informal workers.
Non-governmental organisations, she added, are critical for awareness creation and trust-building at community level.
Ultimately, the healthcare costs in Nigeria is no longer confined to hospitals or households. It is deeply embedded in the structure of the economy itself.
With a large share of the workforce operating informally and without financial protection, the economy remains highly exposed to shocks that begin at the household level but quickly scale into national productivity challenges.
Industry analysts note that without stronger health financing systems, particularly expanded insurance coverage, Nigeria risks sustaining a cycle where illness continues to translate into business failure, income loss, and weakened economic growth.
According to Nwoko, protecting informal workers is not only about health outcomes but about safeguarding the productivity base of the entire economy.
“It is very important that these informal sectors are well protected for their health so that they can continue in business, continue contributing to GDP, and not lose their livelihood as a result of illness,” she said.
