Today we shift our focus to the healthcare sector. For any economy, good health care is essential for a vibrant human capital base for its positive impact on labour productivity. Similar to Vietnam and many other developing countries, out-of-pocket payments are the principal source of health financing in Nigeria. We attended a briefing in Lagos yesterday at the Lagos Business School and learned that public budgetary allocations, and direct and indirect taxation, as well as donor funding collectively, account for just 30% of total healthcare expenditure in Nigeria.
- The recent inflation data from the NBS show that prices in the health segment within the urban consumer price index (CPI) rose by 11.4% y/y in June from 11.9% the previous month. Meanwhile, within the rural CPI, prices rose by 9.6% y/y in June.
- Health expenses weigh heavy on household pockets. Although health maintenance organisations in Nigeria have become active in recent years, their healthcare services mainly cover private-sector employees. However, when we consider the National Health Insurance Scheme, enrollees from the public sector (i.e. mainly civil servants) are as high as 4.2 million.
- The healthcare equipment gap is abysmal. To put it into perspective, industry sources suggest that about 100,000 new cancer cases are recorded annually. However, there are less than ten radiotherapy machines in the country. Unless increased investments are made into the sector to give it an appropriate facelift, medical tourism will continue to push fx demand. It is currently estimated at US$1bn per year.
- We note efforts made by the FGN to reverse the trend in medical tourism. In the approved 2018 budget, the federal ministry of health has been allocated N1bn (US$3.3m) for the procurement of 300,000 dialysis consumables. Furthermore, about N950 million (US$3.1m) has been allocated for the supply of medical equipment across the country. These efforts are laudable but may translate into negligible impact, given their modest scale and the reality of structural issues such as power shortages.
- The brain drain in the health sector is one of the chief reasons for underperformance domestically. Based on industry sources, approximately 33% of graduates trained in Nigeria’s state medical schools migrate to the US, Canada or the UK within ten years of graduation.
- Health-tech seems to be gaining some momentum. We understand that CarePay, headquartered in Kenya, may enter the Nigerian market with its mHealth wallet. This is a mobile phone-based wallet with which people can save, insure and pay for healthcare services.
- Reviving Nigeria’s health sector requires a lot of structural changes which can only be achieved realistically in the medium to long-term.