Economic reforms and rising inflation are exerting considerable pressure on Nigeria’s healthcare sector, prompting experts to advocate for new business models to ensure the industry’s long-term sustainability.
This call was emphasized at a Lagos Business School webinar titled “Building a Profitable Healthcare Business in Nigeria”, where industry leaders examined the effects of economic changes on healthcare growth, profitability, and service delivery.
Reforms disrupting stability
Dr. Doyin Salami, Chairman of the Presidential Economic Advisory Council, emphasized that while the country’s economic reforms aim to stabilize the economy, they have initially disrupted equilibrium, creating significant challenges, especially for sectors like healthcare.
“The challenge the economy faces is that the reforms, like any reform, have destabilized the initial equilibrium, and the economy is trying to get back to stability,” he said.
He highlighted inflation as a pressing issue, particularly its disproportionate effect on consumer prices compared to factory gate prices. “While factory gate prices are rising at roughly 13%, consumer prices are increasing at over 30%,” he explained, attributing this spike to rising logistics costs and market inefficiencies.
When it comes to healthcare, He stated that ” the health sector’s contribution to GDP remains very small, under 1%, with growth slowing significantly since 2015,” he noted.
Despite the slow growth, Salami did highlight an encouraging trend—an increase in consumer spending on healthcare services. “Consumer spending on healthcare has grown from 1.4% of household expenditure in 2003 to 3% today, and it’s projected to rise to 6.1%,” he said.
However, Salami raised questions about whether this increase in spending stems from a lack of adequate government provision, pushing more Nigerians to pay out-of-pocket for private healthcare.
He called for more detailed data to determine which socio-economic groups are driving this increase in healthcare expenditures.
Meanwhile, Ugodre Obi-Chukwu, CEO of Nairametrics, also expressed concerns about the healthcare sector’s representation in Nigeria’s broader economy. “the sector contributed N1.2 trillion to the country’s GDP, accounting for approximately 0.7% of the overall economy.”
“Many people find it hard to believe, but based on GDP data, Nigeria’s healthcare sector as a percentage of the economy is about 0.7%,” Ugodre said. “We are also ranked 24th among economic sectors. When you break it down further, healthcare ranks 46th or 47th among the country’s subsectors.”
One of the most notable trends Ugodre observed is that the healthcare sector has experienced consistent growth since the COVID-19 pandemic, which began in 2020.
“It’s interesting that the healthcare sector has grown every quarter since 2020,” he noted. “I’m not sure we’ve seen any negative growth in that period. However, in the last quarter, it lagged behind the general economy, growing at 2.4% compared to the overall economy’s 3.19%.”
Ugodre observed that although the healthcare sector has grown steadily since the COVID-19 pandemic, it remains underrepresented on the Nigerian Stock Exchange (NSE), with only seven healthcare-related companies listed out of 160.
“Without more companies in the sector listed on the exchange, it will be challenging to raise the capital needed for further development,” he warned.
He also noted that the total market capitalization of healthcare and pharmaceutical companies on the NSE is just N100 billion, a tiny fraction of the exchange’s overall value of N56 trillion.
Profitability and Sustainability
- Chidi Okoro, a strategic management expert at Lagos Business School, stressed that profitability remains key to the sustainability of the healthcare sector.
- He noted that several trends have shaped the healthcare landscape post-COVID-19, including the influx of foreign investment and the proliferation of HMOs.
- However, he warned that despite the sector’s growth, there remain significant challenges, including high competition, declining consumer incomes, and a lack of marketing and business collaboration.
“When GDP per capita is below $3,800, healthcare is not a priority,” Okoro said, citing the current economic conditions that limit consumer spending on healthcare services.
In a call to action, Okoro urged healthcare players to rethink their approach to business, focusing on marketing, collaboration, and innovation. “We need to understand the difference between growing and scaling. Growth is not equivalent to scaling profitably,” he said.