Africa’s ‘giant-in-waiting’, Nigeria is a country with considerable wealth — and enormous potential that has yet to be fully realized. For this reason, working with IFC’s on-the-ground team to help expand our activities in the Nigerian healthcare market has been a high point in my career.
For the past couple of years, in discussions with stakeholders, including a recent business roundtable we hosted, I have heard one recurring message: ‘What more can IFC do to help?’
We are working on multiple fronts. We have made investments in a major hospital group and a chain of diagnostic centers. Through the Health in Africa initiative, we are working with the government on a number of policy and regulatory projects, including those to improve the nascent national health insurance system and expand the use of Health PPPs. We continue to evaluate a number of new investment opportunities.
Our overarching goal is to bring together stakeholders to ‘make’ projects. Much remains to be done.
Africa’s most populous country, with over 180 million people, Nigeria faces a diverse set of challenges in health. Communicable diseases like malaria are still a real problem, while non-communicable diseases like cancer and diabetes are on the rise.
The country spends 3.7 percent of its GDP on health care, three quarters of which is in the private sector. Undoubtedly the country needs to increase its level of public financing as a priority in order to match its Universal Health Coverage aspirations.
Fragmented market with much room for growth
Nigeria has a limited but expanding social insurance system. Several state governments, including Lagos, Kwara, Delta, Ogun, and Cross Rivers, are making it mandatory for all citizens to have some form of health insurance, where government aspires to pay for those unable to afford premiums. As for the private health insurance market, penetration — as with most developing countries— is low, in part because of a public perception of low quality.
The market is fragmented, with thousands of small primary clinics, hospitals, pharmacies, and diagnostic centers. Some companies would like to scale up and create a nationwide network but they face a daunting set of obstacles.
Public resources for health are limited. A major oil exporter, Nigeria did well in the 2000s when oil prices were high but failed to invest enough of its revenues in healthcare infrastructure. Now with oil prices low, revenues have dipped so help from outside investors is needed and wanted.
There is large room for growth in the healthcare market. Many Nigerians travel to Europe, the Middle East, and India for their healthcare needs, including even for routine procedures or check-ups. They spend, according to some estimates, as much as $1 billion a year, which could otherwise be ploughed into the Nigerian economy.
Somewhat counter-intuitively, despite the obvious unmet demand within the country, some private hospitals in Nigeria only have 50-60 percent occupancy. Varying levels of service quality, very high charges, lack of a full array of services, and a general lack of confidence in local providers are cited as reasons for this.
Creating conditions to reverse medical tourism
Another problem has been the outflow of human resources. Many Nigerian medical professionals work in Western cities like London and Houston. We are, however, starting to see some of this diaspora return home to help the country’s health system reach its potential. Many more want to come and this is a critical resource to fill in the skill gaps in the sector. Taking that big step would be made easier if we could give them greater confidence in the investment environment and a better-developed infrastructure to return to.
As for investors, a big challenge is the country’s dramatic currency fluctuations, which make it hard to develop suitable financial products.
IFC provides local currency-denominated debt, but interest rates are high due to uncertainty about the currency movements. With access to the official market limited, foreign currency is exchanged in the parallel markets at rates up to 50 percent higher than the official rate.
Despite these challenges, investors are looking to come and IFC is prepared to support them. I expect a prime target in these efforts to be Nigeria’s growing middle class, who are seeking reasonably priced quality services at home.
Buoyed by the scale that this educated, quality-seeking population will create, Nigerian health companies can then tap both the upper-income segment leaving the country, and lower-income populations who most likely will be supported by the social insurance schemes. This is how many business models have evolved in similar settings, we have observed over the years. We intend to bring together the necessary knowhow and partners to create such a market.
The world’s nations are clamoring for value for money in health care, none more so than Nigerians. Integrated models of care, through hub and spoke models, efficient referral systems, and public private partnerships can help achieve this.
One thing is clear: while Nigeria’s health market is not a ‘quick buck’ kind of place, it cannot be ignored given the huge need and potential. It requires a strong commitment and patience to succeed. IFC is in for the long haul and we encourage others to join us.