Martins Hile, Editor, Financial Nigeria magazine

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Nigeria's low capacity to receive health investment 18 Apr 2017

Last year, the Minister of Health, Prof. Isaac Adewole, told the Punch newspaper that Nigeria's health sector “has suffered from chronic underfunding for many years now.” According to him, “we are even behind South Sudan, Angola and Ethiopia.” Even if he was engaging in the blame game, which the President Muhammadu Buhari's administration uses to deflect its lack of performance, the Nigerian health sector is in a parlous state.
According to the World Bank, total health spending as a share of Nigeria's GDP has been below 5% since 2000. Total health spending in 2014 was 3.7%, out of which only 0.9% represented public spending. This data shows that Nigeria's private sector spending – much of which is out-of-pocket – is three-quarters of the country's total health expenditure.

This year, the total amount spent by Nigerians seeking medical treatment abroad will exceed public expenditure on health. N304 billion is the allocation for health in the 2017 budget. Using the inter-bank exchange rate of N307/$1, the estimated $1.3 billion the country spends on external medical tourism annually will exceed the health budget by 31%.

Restructuring the public expenditure for more allocation to health has been a clarion call in health policy circles for some time. The advocacy is in recognition of the role that government plays in the overall performance of the health sector. But government's role extends beyond financing to governance of the health system, which is a determinant of private sector investment into the sector. But here, a new study has revealed the spectacular failure of the Nigerian government.

Last month, the Washington DC-based think tank, the Brookings Institution alerted Financial Nigeria on the result of its new healthcare study. In its study – Health Governance Capacity: Enhancing Private Sector Investment in Global Health – which surveyed the health governance capacity of 18 low- and middle-income countries in sub-Saharan Africa and Asia, Nigeria is placed at the very bottom of the ranking, below Pakistan and Democratic Republic of Congo. Liberia and Sierra Leone – two of the three West African countries worst affected by the 2013-2016 Ebola outbreak – rank better than Nigeria.

Three African countries – South Africa, Ghana and Mozambique – are among the top-five ranking countries on the Health Governance Capacity Index (HGCI). These countries, including Vietnam (1st) and China (3rd), are believed to have the greatest potential to attract private sector investment in health R&D because of their high performance on overall health governance.

The HGCI was compiled by combining five dimensions of health governance relevant for private sector investment. The five dimensions are Leadership and Management Capacity; Regulations; Policies; Infrastructure and Financing; and Health Systems. The study then assesses 25 indicators related to the five dimensions.

In the dimension where Nigeria scored lowest, namely Leadership and Management Capacity, Ghana and Liberia received their highest points. The indicators under this dimension provide a clue as to why Nigeria is outperformed by its smaller West African neighbours. The indicators include Transparency International Corruption Index Score, Political Stability Index, and external resources as a percentage of total health expenditure.

Under Regulations, where Nigeria received its highest score, the country is on par with Liberia and only two points behind Ghana. Some indicators under this dimension are: health expenditure as percentage of GDP, business climate, and the presence of pharmaceutical drug regulatory bodies.

Last year, the IFC and Nigeria Sovereign Investment Authority announced they were mapping out strategies to develop Nigeria's private healthcare sector and reverse the medical tourism trend. This effort will yield results, only to the extent they influence government's policy for marked improvement in the governance of the health sector. But there is hope that the IFC – NSIA partnership symbolizes potential solution. The NSIA is the governmental institution that manages the Nigerian sovereign wealth fund. To what extent it can influence government health policy remains to be seen. But the NSIA can act as a bridge between policy and market, given that the IFC is the arm of the World Bank that lends to the private sector.

The Brookings' study defines health governance capacity as the ability of a nation's institutions to implement health policies, provide medical services, allocate resources efficiently, and help the country respond to health crises. “Good governance is a foundational condition for global health investment,” the authors – Darrell West, John Villasenor, and Jake Schneider – said. “It conditions the overall environment in which both public and private sector health investment takes place.”

In light of this, it is hoped that ongoing efforts to improve the ease of doing business in Nigeria – which essentially targets making the country more attractive for foreign investment – will factor reform needs in the health sector into the agenda.

External medical tourism is not a credible solution in addressing the healthcare needs of Nigerians, although it is increasingly the option embraced by the privileged class. Neither would mere clamouring for private sector investment – domestic or foreign – deliver the good. The government has to create the conditions for the investments.