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The Nigerian Economy And Its Health Care Financing System

6 Jun, 2021 | Maduka Chidera | No Comments

The Nigerian Economy And Its Health Care Financing System

The Nigerian Economy And Its Health Care Financing System

Health care financing system is a process by which revenues are collected from primary and secondary sources. Some of these include out-of-pocket payments (OOPs), indirect and direct taxes, donor funding, co-payment, voluntary prepayments, mandatory prepayment, which are all accumulated in fund pools so as to share risk across large population groups and using the revenues to purchase goods and services from public and private providers for identified needs of the population, e.g., fee for service, capitation, budgeting and salaries (Uzochukwu,Ughasoro,Etiaba,Okwuosa, Envuladu, and Onwujekwe, 2021).

Healthcare provision in Nigeria is a concurrent responsibility of the three tiers of government in the country. Private providers of healthcare also have a visible role to play in health care delivery. Nigeria’s health care system faces notable challenges; such as poor healthcare infrastructures, lack or inadequate funding, and poor policymaking and implementation which leads to underinvestment in the healthcare system. These challenges among others in the Nigerian healthcare system contribute to failure in the healthcare system. (Akunne, Okonta, Ukwe, M. O, M.J, C.V,  2019).

The way a country finances its health care system is a critical determinant for reaching universal health coverage (UHC). This is so because it determines whether the health services that are available are affordable to those that need them. In Nigeria, the health sector is financed through different sources and mechanisms. The difference in the proportionate contribution from these stated sources determine the extent to which such health sector will go in achieving successful health care financing system. Unfortunately, in Nigeria, achieving the correct blend of these sources remains a challenge. This review draws on relevant literature to provide an overview and the state of health care financing in Nigeria, including policies in place to enhance healthcare financing. We searched PubMed, Medline, The Cochrane Library, Popline, Science Direct and WHO Library Database with search terms that included, but were not restricted to health care financing Nigeria, public health financing, financing health and financing policies. Further publications were identified from references cited in relevant articles and reports. We reviewed only papers published in English. No date restrictions were placed on searches. It notes that health care in Nigeria is financed through different sources including but not limited to tax revenue, out-of-pocket payments (OOPs), donor funding, and health insurance (social and community). In the face of achieving UHC, achieving successful health care financing system continues to be a challenge in Nigeria and concludes that to achieve universal coverage using health financing as the strategy, there is a dire need to review the system of financing health and ensure that resources are used more efficiently while at the same time removing financial barriers to access by shifting focus from OOPs to other hidden resources. There is also need to give presidential assent to the national health bill and its prompt implementation when signed into law.( Uzochukwu, et. al, 2021).

Akunne et. al (2019) explained that  “Healthcare delivery in Nigeria has experienced progressive deterioration as a result of weakened political will on the part of successive governments to effectively solve a number of problems that have long existed in the sector over many years. This directly impacts the productivity of citizens and Nigeria’s economic growth by extension. Over half of Nigeria’s population live on less than $1.90 a day (‘Poverty Head-count’), making them one of the poorest populations in the world. As of February 2018, the country was ranked 187 out of 191 countries in the world in assessing the level of compliance with the Universal Health Coverage (UHC), as very little of the populace are health insured, whereas even government provision for health is insignificant. Out-of-pocket payments for health causes households to incur huge expenditure. Private expenditure on health as a percentage of total health expenditure is 74.85%. The implication of this is that government expenditure for health is only 25.15 percent of all the money spent on health all across the nation. Of the percentage spent on health by the citizens (74.85%), about 70% is spent as out-of-pocket expenditure to pay for access to health services in both government and private facilities. Most of the remaining money spent by citizens on their health is spent on procuring ‘alternatives’ which cost a lot”. Nigeria has better health personnel than most other African countries. However, considering its size and population, there are fewer health workers per unit population than are required to provide effective health services to the entire nation. Sadly, the most commonly advertised reason is the ‘brain drain’ of health professionals to other countries, especially in Europe and America.


To explain the influence of Nigerians economy on healthcare system

To identify the percentage of health spending that the government controls

To know the factors that affect the provision of health care services.

Literature review

In Nigeria, revenue for financing the health sector is collected majorly from pooled and un-pooled sources. The pooled sources are collected from budgetary allocation, direct and indirect taxation as well as donor funding. However, the un-pooled sources contribute over 70% of total health expenditure (THE) and this can be: OOPs in the forms of fees (informal or formal direct payments to healthcare providers at the time of service) about 90% and payments for goods (medical products such as bed-nets, or condoms) and about 10%. Despite these health financing options in Nigeria, the finances are still disproportionately distributed across the health system and with regional inequity in healthcare expenditure. ( WHO,2020).

Funding healthcare expenditure in Nigeria is from a variety of sources which include government, private sector, international donor agencies and NGOs.This study focuses on government funding. Government, which comprises budgetary allocations from governmentatal levels (Federal,States and Local Government).

However,a high unemployment rate,soaring prices and aparticularly more difficult economic situation for the majority of the poor population has severe consequences on the health status of Nigerians.


In 2018, general government expenditure for Nigeria was 14.9%. hare of current health expenditure of Nigeria fell gradually from 25.9% in 2004 to 14.9% in 2018. By 2021, the expenditure in Nigeria on healthcare is projected to increase overall. The government’s spending on healthcare is fore casted to reach 1,478billion Nigerian Naira. In 2019, this figure amounted to 1,191billion Nigerian Naira.

On the other hand, private spending on

health is projected to add upto 4,284 billion Naira by 2021,representing the

main source of expenditure on health in Nigeria.(Simona,2020)

The way a country finances its health care system is a critical determinant for reaching UHC. This is so because they determine whether health services exist and are available and whether people can afford to use health services when they need them. This can be achieved by a well-planned combination of all healthcare financing mechanisms, which include: Tax-based financing, OOPs, donor funding, health insurance exemptions, deferrals and subsidies. The main thrust is how to generate adequate revenue to finance health services from a diversified group of people, without over tasking the formal sector workers. Since in Nigeria, the formal sector workers are the group that their contributions are its tax or agreed deduction, can easily be access from source and this constitutes 47% of the working population. The situation is different when informal sector (about 53% of the working population) is considered, due to infective tax collection system, inefficient formula to calculate the amount to collect, and lack of confidence on those that will be mandated to collect the fund.(Uzochukwu, 2021)

The political and socio-economic factors that influence nigeria’s economy and their effects and provision of healthcare services

50 years after independence nigeria is still struggling with the provision of basic health services for its teeming population, now estimated at over 150 million. The healthcare sector is still a labour-intensive handcraft industry, in spite of advances in technology. healthcare provision has become more complicated done in the past, the health sector in any economy forms the backbone of its growth and development.

Social economic factors that influence nigerian economy and their effect on provision of health care services;

Social economic factors such as

  • Income
  • Education
  • employment status
  • Community safety
  • Social support

These factors affect our ability to make  healthy choices , afford medical care and housing, manage stress and more.

The social economic opportunities we have such as good schools stable jobs and strong social networks and fundamental to achieving long and healthy lives. For example employment provide income that shapes choices about housing education health care food medical care and more. In contrast, unemployment limit these choices and the ability to accumulate savings and assets that can help cushion in times of economic distress.

social and economic factors are not commonly considered when it comes to health strategies to improve these factors can have an even greater impact on health over timesocial and economic factors are not commonly considered when it comes to health yes strategies to improve these factors can have an even greater impact on health overtime then those traditionally associated with health improvement such as strategies to improve health behaviours.

In social and economic factors area of the country health rankings we look at.

  1. Education, showing who in a community has graduated high school or attended some collage in addition to the percentage of teens and young adults ages 16-19 who are neither working or school.
  2. Employment, detailing unemployed statistics
  3. Income, looking at children in poverty and income inequality.
  4. Family and social support, providing information on children in single-parent house hold and access to social opportunities.
  5. Community safety, measuring violent crime and injury death.


Positive/ negative effects of political factors on the provision of Healthcare service.

The political impact on the Healthcare service performance is changing continuously mainly because of the changing government regulations.

Many economics across the world have introduced ways through which spending in the health industry is curbed down /restrained.

These political factors include changing tax laws, employment regulations, consumers protection laws and insurance mandates can impact the healthcare industry.

In addition to this, government spending on the healthcare industry is greatly affected by changes in tax policy.

Social-economic factors

Unemployment, interest rates credit availability and inflation are economic factors that affect health care industry performance and operation.

These socio economic factors can greatly influence the spending policies of companies and purchase behaviours of consumers.

For example, higher unemployment levels would imply/imploy them no to t use  the services rendered by health care manufacturer.

  1. Inadequate political commitment to health, leading to poor funding of health in general, and PHC in particular
  2. Gaps in the area of stewardship and governance as evidenced by lack of clarity of the role of government, at all levels in financing health care
  • Absence of a health policy that clearly spells out how funds are to be allocated and spent in the health sector
  1. Governance issues with the NHIS and poor buy-in by the states limiting coverage
  2. Dominance of OOPs presents possibilities of under/oversupply of services depending on financial abilities
  3. Nonexploitation of other sources of health financing
  • Several stakeholders, including development partners finance health independently and not in accordance with governments’ policy thrust. This has led to inefficient use of scarce resources and duplication of efforts.

A lot of countries have been devising innovating health financing mechanism in other to achieve UHC. These responses, which have attracted considerable controversy involve the questions of whether to pay for health care through general taxation or contributory insurance funds to improve financial protection for specific sections of the population, whether to use financial incentives to increase health care utilization and improve health care quality, and whether to make use of private entities to extend the reach of the health care system.

What policies and plans are in place for the financing of health care in Nigeria?  (positive effects)

Review has showed that the Nigerian government has put in place various policies and plans addressing health care financing. Now how can we focuses on  moving closer to UHC with issues related to how and from where to raise sufficient funds for health; how to overcome financial barriers that exclude many poor from accessing health services; and how to provide an equitable and efficient mix of health services. These policies and plans include the National Health Policy, Health Financing Policy, National Health Bill and National Strategic Health Development Plan (2010-2015).

National Health Policy

The key thrusts of the National Health Policy in relation to health financing are to expand financial options for health care and strengthen the contribution of the private sector and prepayment based approaches for financing. It also seeks to engage communities and households in community-based schemes for the financing of primary care services. Public-private partnerships are also presented as strategic approaches for the expansion of health financing options at all operational levels. Specific provisions include increasing government funding to international standards, prioritization of primary health care (PHC) and rural poor in funds allocation and increasing allocative efficiency by redistributing resource allocation between levels of care to ensure adequate allocation to preventive and promotive care.

National Health Financing Policy

The Federal Ministry of Health enunciated a National Health Financing Policy in 2006.  The policy seeks to promote equity and access to quality and affordable health care, and to ensure a high level of efficiency and accountability in the system through developing a fair and sustainable financing system. The overall goal is to ensure that adequate and sustainable funds are available and allocated for accessible, affordable, efficient, and equitable health care provision and consumption.

The revenue mobilization and pooling strategies to increase the fiscal space while ensuring fair financing, including risk protection of the vulnerable financing include:

  • Mandating federal, state and local governments to allocate at least 15% of their total budgets to health in line with the 2000 Abuja declaration
  • Establishing SHI and CBHI schemes; within the context of the NHIS so as to expand cover to the informal and rural populations, which make up 70% of the population, as a strategy toward universal access
  • Support to states to develop state health insurance schemes to be regulated by the NHIS
  • Support for voluntary (private) health insurance and discouragement of retainership
  • Identifying, adapting and scaling up of financing schemes shown to expedite universal coverage, such as drug revolving fund schemes, deferrals, exemptions etc
  • Harmonization of external aids and partnerships for health financing
  • Promotion of domestic philanthropy
  • Minimization the burden of out-of-pocket expenditure as this negates fairness in financing and promotes catastrophic health expenditure. The policy stipulates that “as much as possible efforts will be made to discourage out-of-pocket health expenditure” and improve funding of disease specific interventions. At present, <5% of national budget goes to health and <5% of the Nigerian population is covered by NHIS and state health insurance scheme is only inaugurated in two states out of 36 states of the federation.

National Health Bill

The National Health Bill, which is still awaiting presidential accent represents the first attempt to provide legislative clarification and funding sources to support PHC. It includes provisions for a Basic Health Care Provision Fund; if passed, will significantly increase government financing for PHC. The Bill targets universal coverage with at least basic services. Specifically, the fund is to be financed from:

The consolidated fund of the federation, an amount not <1% of its value

Grants by international donor partners; and

Funds from any other source.

It is proposed that:

  • 50% of the fund shall be used for the provision of basic minimum package of health services to all citizens, in eligible PHC facilities through the NHIS
  • 25% of the fund shall be used to provide essential drugs for primary healthcare
  • 15% of the fund shall be used for the provision and maintenance of facilities, equipment and transport for primary healthcare
  • 5% of the fund shall be used for the development of human resources for eligible PHC facilities; and
  • 5% of the fund shall be used by the Federal Ministry of Health for National Health Emergency and Epidemic Response.
  • The Bill proposes that National Primary Health Care Development Agency has responsibility for disbursing the funds for essential drugs for PHC, facility maintenance and human resource development through State Primary Health Care Boards for distribution to Local Government Health Authorities. The Bill indicated that for any state or local government to qualify for federal government block grant, the state and Local Government Area (LGA) must contribute not <10% and 5% respectively of the total cost of the project.

National Strategic Health Development Plan 2010-2015

National Strategic Health Development Plan (National Health Plan) – reflects shared aspiration to strengthen the national health system and to vastly improve the health status of Nigerians. The plan is the overarching reference health development document for all actors toward delivery on a shared results framework, to which each and every one will be held accountable for achieving the goals and targets as contained in the results framework. The health plan, which was also developed in tandem to the guidelines of the National Planning Commission – Vision 20:2020 process (including the V20:2020 implementation plan), is the compass or reference for the health sector Medium Term Sector Strategy and annual operational plans and budgets at all levels. [15] The overall goal is to ensure that adequate and sustainable funds are available and allocated for accessible, affordable, efficient, and equitable health care provision and consumption at local, state and federal levels.

The strategic objectives are:

  1. To develop and implement health financing strategies at federal, state and local levels consistent with the National Health Financing Policy
  2. To ensure that people are protected from financial catastrophe and impoverishment as a result of using health services
  3. To secure a level of funding needed to achieve desired health development goals and objectives at all levels in a sustainable manner
  4. To ensure efficiency and equity in the allocation and use of health sector resources at all levels.


Lack of success in achieving health care financing, has continued to be a challenge in achieving UHC in Nigeria.

The review has identified barriers to efficient health care financing and the following strategies are recommended if Nigeria is to achieve UHC:

(i) Replacement of OOPs with more equitable modes of financing;

(ii) articulate clear policies on PHC financing;

(iii) there is currently a lack of clarity as to the roles of different levels of government in financing PHC, and which components are to be financed by each level of government;

(iv) governments should give higher priority to health in their budget allocations;

(v) pass the national health bill and implement it;

(vi) explore innovative ways of mobilizing funds and financing health. Tax-based health financing is recommended. The excise, value added tax or “sin taxes” on products such as alcohol and tobacco (products that pose risks to health) can be extended to include unhealthy foods such as sweets, sugary drinks and foods high in salt and trans-fats. Other possibilities for innovative fund-raising include solidarity levies on mobile phone call tariffs (over 90 million Nigerians own and use mobile phones), raising diaspora bonds (from our large diaspora population), and taxing specific profitable sectors of the economy like banking, oil and gas. Nigeria is already exploring fund-raising from diaspora bonds. [42] Other measures are; extending the NHIS to the informal sector through the CBHI; mobilize the private sector (telecommunications and banks) and local philanthropists-for the telecommunications an arrangement whereby a certain percentage (to be determined) of each recharge card purchased goes into the revenue pool for financing health. Donors should do more to meet their stated international commitments for ODA and to provide more predictable and long-term aid flows in Nigeria. They should align their support with Nigeria’s national development strategies, in line with the Paris declaration on aid effectiveness; more money for health: Though raising overall general government revenues will translate into more money for health, new means of raising direct funds for health are also needed. The “more money for health, and more health for the money” includes mechanisms designed to raise funds in excess of conventional means as well as mechanisms that improve how these funds are used [43] should be uphold.

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