With the Coronavirus pandemic inadvertently preventing medical tourism among Nigerians, global attention has shifted to the African giant’s healthcare spending gap. Now, foreign investors are looking to create the change.
According to a recent report from real estate consultancy Knight Frank, Nigeria would require 386,000 additional beds and $82 billion of investment in health-care real estate assets to reach the global average of 2.7 beds per thousand people.
Currently, its healthcare expenditure amounts to just 3.89% of its $495 billion GDP, according to the latest available figures from the World Bank.
A Knight Frank poll of 140 global investors in June found that 80% were considering investment in African health infrastructure in light of the coronavirus crisis, primarily around hospital-related real estate and operating companies in collaboration with domestic experts.
As the pandemic further exposed the country’s weakening health sector, the Nigerian government issued 100 billion naira ($254.6 million) in state credit facilities for health care, from pharmaceutical companies and product manufacturers to service providers, which has seemingly spurred greater interest from private investors.
The Bank of Industry, a Nigerian development finance institution, further supplied 50 billion naira.
Pre-pandemic Interests
Even prior to the pandemic, African health-care assets had begun to generate interest more broadly. The International Finance Corporation, part of the World Bank, partnered with the Investment Fund for Health in Africa-II (IFHA-II) in November 2019 to form a $115 million acquisition vehicle for health-care service businesses in the east and south of the continent.
European development finance organizations such as Swedfund, the Swedish development finance institution, have backed IFHA, along with the likes of Pfizer and the Stitching Social Investor Foundation for Africa, whose backers include Aegon, Heineken, Shell and Unilever among others.
“There is a very compelling opportunity for the development of world-class healthcare facilities across Africa, but especially Nigeria,” said Hafeez Giwa, managing partner at HC Capital Properties, which has started to invest in health-care assets in Nigeria.
Hafeez Giwa, managing partner at HC Capital Properties, has begun to invest in Nigerian health care infrastructure.
“Most of the public hospitals here were constructed over 40 years ago and only a handful have received any investment since then,” Giwa said in a report published Monday by frontier markets consultancy New Markets Media & Intelligence.
Tosin Runsewe, CEO at health-care investment firm AfyACare Nigeria, highlighted another opportunity: obligatory health insurance for all employees would see insurance costs lowered and the percentage of health-care costs covered could rise to between 20% and 30% by 2030.
As it stands, around 72% of household health-care expenditure is out-of-pocket, compared to the sub-Saharan average of 35%, the Knight Frank report highlighted, and only 5% of health care is covered by insurance.
“If we could attain a critical mass of 40 million to 60 million Nigerians with healthcare cover, the cost of this treatment could be met through health insurance premiums of around only 20,000 Naira ($50) a year, half the current average cost,” Runsewe said.
“There is an array of opportunities for investors in private primary healthcare clinics that can provide services at an affordable cost.”
Giwa said HC Capital Properties was investing in Nigeria due to both “extreme need” and government initiatives which have rendered it easier to develop high-quality assets that offer affordable care. He suggested that there are two types of investors currently exploring these opportunities.
“On the one hand, there are local institutional investors and local pension funds that, in Nigeria’s case, are Naira investors and do not have any concerns about currency risk,” Giwa said.
“On the other hand, there are development impact investors and institutions that are excited by the prospect of delivering high-quality healthcare to lower- and middle-income Nigerians.”
He anticipates that the pandemic has brought about a “permanent change in thinking” which will place greater emphasis on quality health care at home.
At present, Nigeria loses up to $1 billion per year to outbound health tourism among wealthier Nigerians due to inadequate domestic access, according to a recent PwC report.
