Nigeria’s health sector holds massive investment opportunities, says report

The attention of the global community of investors focused on healthcare has been drawn by a new report to the window of massive opportunities in Nigeria where it says some doses of private capital could help close a funding shortfall for the country’s health sector.

Opportunities are opening up on the back of efforts to strengthen the sector in recent years resulting in some progress being made on a number of health and wellness indicators, the report stated.

Produced by Oxford Business Group (OBG) under the title “Nigeria Health: Focus Report”, it identified investment opportunities in different areas of the Nigerian health sector, including health infrastructure provision, local production of consumable items like syringes and needles, medical technology, and the pharmaceutical industry.

It also highlights the opportunities for investors to contribute to the development of Nigeria’s health sector by bridging funding shortfalls for planned infrastructure projects and supporting other segments with high growth potential.

According to the report, which was recently released, Nigeria has made tangible progress on a number of health and wellness indicators in recent years, but the socio-economic and medical impacts of the Covid-19 pandemic took their toll, and the country continues to grapple with challenges related to its public health system and the rollout of universal health care (UHC).

“With Nigeria’s large and young population, the longer-term prospects for private sector investment in the health care sector are promising, and the pandemic has created new opportunities for expansion and innovation,” the report said.

“Indeed, given the continuing mismatch between the country’s health infrastructure needs and available public funding, there is substantial scope for private sector participation in capital projects in the years ahead. Private players providing high-quality medical services at new and existing facilities, as well as supportive financing, could help overcome the limitations of the public system and may ultimately lead to more Nigerians remaining in-country when seeking treatment,” it said.

Quoting data published by the Nigeria’s Federal Ministry of Health, the report said there were 40,368 hospitals and clinics in operation in Nigeria as of mid-2021, split between 10,900 private facilities (27 percent of the total) and 29,468 public facilities (73 percent). Of this number, 85.2 percent were primary care facilities, 14.4 percent offered secondary care, and 0.4 percent provided specialised, tertiary care.

It noted that the health infrastructure gap in Nigeria amounted to some N3.7 trillion by 2020, which illustrates the sizeable funding needs to cater to the growing health care requirements of the country’s over 200 million population.

“This deficit has seen Nigerians seek treatment abroad, which results in some $1 billion in lost spending locally every year. Funding gaps have also led to so-called brain drain, as trained medical personnel look for more lucrative employment opportunities outside of the country,” the report said.

“Given the large share of the government health budget that goes towards recurrent expenditure – as well as the impact of fluctuating international energy prices on government revenue – there is ample opportunity for private sector participation in capital projects,” it said.

The OBG report highlighted a number of hospitals already operating under a PPP model in the country, such as Garki Hospital Abuja, Lagos University Teaching Hospital, Ibom Specialist Hospital in Akwa Ibom, Lagos State University Teaching Hospital and University College Hospital Ibadan.

It added that the pandemic has helped to create new opportunities to expand capacity in the sector, with a plan to build 14 new medical centres and upgrade two intensive care units across the country’s six geopolitical zones, which gives room for private sector participation.

The OBG report also considers the potential Nigeria has to boost local production capacity for consumable items, such as syringes, bandages and dressings, needles and catheters, and, in turn, reduce its import bill. It also looks at emerging opportunities in medical technology, where digital solutions are helping to extend care to underserved areas and facilitate remote diagnosis and treatments; the pharmaceutical industry where, with Nigeria’s reliance on China and India for pharmaceuticals as shown at the start of the Covid-19 pandemic, there is scope for increasing local production capacity.

Karine Loehman, OBG’s managing director for Africa, said that while Nigeria’s health sector continues to feel the knock-on effects of the Covid-19 pandemic and other pre-existing challenges, the government had made notable progress in meeting key health indicators in recent years, while a successful PPP model bodes well for investors eyeing opportunities in infrastructure and other segments showing potential.

“Nigeria’s expanding population and underlying fundamentals make it an attractive proposition for the international investment community,” Loehman said.

“With the pandemic having created new opportunities for expansion and innovation, and public funds limited, our report points to a health sector ripe for development, offering opportunities that range from capital projects to the provision of high-quality medical services at new and existing facilities,” she said.

Indeed, the focus report talks up the opportunities for investors to contribute to the development of Nigeria’s health sector by bridging funding shortfalls for planned infrastructure projects and supporting other segments with high growth potential.

It said the PPP model could help bring a range of health care projects to life and help Nigeria to achieve its ambitious goals for the sector, which include increasing the number of hospital beds to nearer the global average bed-to-population ratio of 2.7 per 1000 people.

The report established that Nigeria finances its health care delivery through a combination of public and private sector initiatives, and noted that the first PPP in the health sector took place after the government released its 2005 National Policy on PPP for Health, which was initially aimed at addressing specific metrics such as high infant and maternal mortality rates.

It found that as at 2020, the year of the pandemic lockdown, Nigeria’s health infrastructure gap amounted to some N3.7 trillion, showing the huge funding required to cater to the growing health care requirements of Nigeria’s population of more than 200 million.

The report also stated that the Covid-19 pandemic has helped to create new opportunities to expand capacity in the sector, including the plan to build 14 new medical centres and upgrade two intensive care units across the country’s six geopolitical zones, which the private sector is able to participate in.

It said the project, with a cost of $58 million, was announced in mid-2020, and has state-owned Nigerian National Petroleum Corporation as partial financier with the rest of the funding to come from private players. It also acknowledged an initiative called “Adopt a HealthCare Facility”, which was conceived in 2019 by private sector stakeholders and ramped up during 2020 due to the onset of the Covid-19 pandemic, which aims to establish market-based, low-cost, primary health care centres across Nigeria’s 774 local government areas to provide services to uninsured residents.

The report noted that investment opportunities have opened up against the backdrop of limited public spending and a growing burden of care for an expanding population which  makes room for  private capital intervention.

“The breakdown of health care financing in the country points to the scope for increased private sector participation: development partners account for 4% of the total, compared to 69% in out-of-pocket expenditure, 24% in government spending and a 3% contribution from private insurance. In terms of physical infrastructure, the country requires an estimated $82 billion in real estate investment and an additional 386,000 hospital beds to reach the global average bed-to-population ratio of 2.7 per 1000 people, according to a 2020 Knight Frank report,” the report stated.

To potential investors the report noted that “while the underlying fundamentals of the health care sector and Nigeria’s demographics already make a strong case for investment, government incentives are helping to increase the market’s attractiveness further.”

It noted that in the first year of the Covid-19 pandemic, the government issued some N100 billion in credit facilities for health care that were awarded to pharmaceutical companies, goods manufacturers and medical service providers, adding that loans were limited to a maximum of N2 billion per recipient, with interest rates capped at 5% per annum – considerably below the benchmark rate of 13.5% at the time.

Also, another N50 billion in credit was offered by the Bank of Industry, it acknowledged, with the National Strategic Health Development Plan II (NSHDP II), covering the period 2018-22, identified pressing investment gaps in primary health care, particularly for maternal and child health, which could be addressed through increased private sector participation.

“Among the NSHDP II’s objectives is ensuring that 70% of states have approved investments in universal health care (UHC) priorities. Health Financing Equity and Investment Units at the federal and state level – operating under the Department of Health Planning, Research and Statistics – will give strategic policy direction for achieving UHC targets,” the report stated.

It observed that investors can also qualify for more general investment incentives, such as a 120 percent tax deduction for research and development expenses, or writing off long-term research as capital expenditure against profits.

The report identified opportunities for investors in the areas of devices and equipment production, as well as in technology deployment in the health care sector of the country.

According to the report, “some stakeholders have suggested that remanufacturing – or rebuilding products to their original specifications from used or repaired materials – could provide an alternative to more costly imports, and ultimately garner interest from original equipment manufacturers as they identify opportunities to repurpose equipment and maximise profit in emerging markets with high growth potential.”

And as far as technology is concerned, the report noted that, “In Nigeria there is considerable scope to facilitate the uptake of medical technology. Indeed, many hospitals continue to store patient records on paper, which results in added administrative work and difficulties when patients seek care in a new location. Electronic medical record systems, therefore, represent low-hanging fruit for prospective investors in the sector. Telemedicine – traditionally seen as a way to extend care to underpenetrated areas – accelerated significantly during the pandemic, as patients in rural and urban areas alike sought treatment without the need to visit a hospital and risk infection.”