Government should do what the private sector cannot do

VICTOR OGIEMWONYI 

Victor Ogiemwonyi, a retired investment banker, is a former Governing Council member of the Nigerian Stock Exchange (NSE), now Nigerian Exchange Group (NGX Group). He sent this contribution from Ikoyi, Lagos. He can be reached via comment@businessamlive.com and marketconversations.substack.com 

I was watching an episode of Fareed Zakaria’s Global Public Square (GPS). He was interviewing Michael Lewis, a Wall Street former bond trader, at Salomon Brothers, now turned author. He was talking to Fareed about his new book, “Government”. When he said, “Government should do what the private sector cannot do,” that got me thinking. I started to imagine those things that the government should compulsorily do. It also occurred to me that if governments focus on those things — because they are better equipped to do them effectively, the results will be amazing.

Governments at both federal and state levels can get out of the many things they do now, with poor results,  if they jettison many things they should not be doing, where they are currently jack of all trades but master of none.

Clear thinking on what governments should be focused on, will narrow the choices to four key pillars with some major affiliate services.

Healthcare is number one

Government should lead on healthcare. Only a healthy population is able to work, contribute to the economy, and aspire to, and pursue happiness. This is not a case of the Government not doing anything in Healthcare now, it is a case of reorganising everything and doing it better, with a bigger budget, that signals its intentionality. 

At the very top of government social services to society, is the provision of healthcare. It is the single most important service needed by every citizen of any nation.  No matter who you are. When we say health is wealth, that is because without it, everything else is meaningless. Healthcare is a public good every citizen should have access to, with reasonable affordability. 

This is probably why every major country in the world puts so much into healthcare. The number one spending item in all the advanced economies is healthcare, including the US, the UK, and others. Our healthcare spending in Nigeria needs to be the biggest part of our budgets. More than the budget, it will need to be reorganised for more efficiency and effectiveness. The spending needs to be more targeted to the highest areas of need. 

Restructuring the healthcare system

The federal government budget for health should be spent on major infrastructure for health, and the balance shared to states proportionately to augment their own spending, allowing them to focus on paying for recurrent expenditure for hiring, training, and paying salaries and allowances of healthcare personnel and buying consumables like drugs. The federal government has no business buying drugs and distributing them to states. It is meddling in areas where the states should have total control, because they are nearer to the problem and can better carry out the needs assessment in their health facilities. 

Federal Medical Centers and Teaching Hospitals, for instance, should be areas of infrastructure the federal government should continue to build, to add to hospital facilities across the country where needed, and it should stop at that. They should be handed over to the states where they are located, and the current cost of running them given to the states to take over and add to their health facilities. States will manage these, as part of their overall responsibility for healthcare provision to their citizens.

All the healthcare facilities in any state, including teaching hospitals, should be managed at the state level and supported by the appropriate budgets. The federal government Ministry of Health should be a strong regulator to monitor and ensure states are doing what they should do. 

The duplication of activities, at the federal level is inefficient and unnecessarily costly. Imagine the cost savings that will accrue were states to buy drugs in bulk, for all the healthcare facilities in their domain — teaching hospitals, federal medical centres, state hospitals, and primary healthcare centres. The savings will be enormous, and the standardisation of purchase will ensure quality control and huge discounts. 

States will have the buying power to negotiate with pharmaceutical manufacturers, whose drugs can also be better managed for quality, eliminate fake drugs, and get rid of current multiple supply contractors, who sometimes provide low-quality drugs and contaminated products. They are also sometimes, avenues for fake drug peddlers.

Healthcare personnel management that includes doctors  and nurses, will be better handled, they will be better paid and trained, while allowing for constant upgrades of facilities, which will be less cumbersome, and efficient.

The current national unionisation of doctors and other medical workers will need to be re-examined. In my view, the national unionisation of these unions will be unnecessary, and bargaining with state unions of medical workers will provide comparisons with other states, and labour relations can be better managed. The current situation where one union has trouble with one state and it spreads to the entire country is not sensible. States can localise their union contracts and can negotiate better with the flexibility of local peculiarities. It can also become a basis of state-to-state comparison of standards, efficiency and effectiveness. 

Freeing up the federal government to focus on the more important areas of providing healthcare infrastructure and letting the states run them, with strong monitoring, is the best way to ensure a better healthcare system that will serve us all.

Healthcare is a right

It must be understood that healthcare is one of the social services that should deserve the biggest subsidy and, if possible, be made free for all citizens at the point of delivery. Healthcare should be a right, and every government should provide it, because it is a key pillar on which any society is built — and only governments can properly provide it.

Let me be clear, this does not preclude private participation in healthcare. In fact, private participation in our health sector is complementary, and provides the competition against which government provision of this service can be measured. 

Nigeria is currently experiencing a revolution in private healthcare provision. It should be encouraged. 

Create levy to pay for universal healthcare coverage 

One of the most profound legacies of President Obasanjo’s Administration was the establishment of the National Health Insurance Authority (NHIS). Despite the terrible management of  successive managers at NHIS, the scheme is defying all odds and still growing. It needs proper management if the agency is to  enhance its ability to achieve its goal and provide strong regulation.

Ensuring that everybody has health insurance is one area of healthcare infrastructure that the federal and state governments need to focus their attention on. Every possible effort by all governments should be made to ensure all citizens are covered by health insurance. This is one area I will recommend the government create a minimum levy that will ensure all health insurance premiums are paid as a shared burden, via risk sharing and funds pooling for everyone in the country who makes any VAT-able purchase. 

This tax can  be effectively collected, and will be a very light burden on everyone compared to the benefits it will bring to our society. It is a progressive tax that the payers of this levy will be able to pay, and be willing to pay. The overall efficiency of this proposal will be a synergy of exponential benefits that will far outweigh the burden of this new tax. 

My proposal is that a health insurance tax of 1% be levied on all VAT-able purchases nationwide. Additional 1% +  current VAT of 7.5% , will total VAT to 8.5%. The extra 1% will be used to underwrite healthcare costs for everybody, and make healthcare free for all citizens. This will be a major step in the right direction. 

Going by the N7.2 trillion collected as VAT in 2024, 1% will equal about N72 billion annually and will grow. This will be in addition to the current budget provisions in both public and private sectors of the economy. This is an expedient way to make it meaningful and ensure quick implementation of free healthcare for all.

This large allocation to our healthcare sector will be meaningful, with a huge multiplier effect, with healthy citizens contributing to the society and the economy. This is viable  and the results will be quickly evident. 

Making healthcare a priority and focusing on it will be good for all. Thankfully, we already have the building blocks. We now need to get rid of the inefficiencies in the system that are hindering its progress and effectiveness.

I will next look at another pillar of what governments should compulsorily do and what efficient ways to do it.

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