Nigeria Health Financing System Assessment: Executive Summary

Nigeria’s future success depends on the government’s ability to transform its non-renewable (and often volatile) natural capital into productive wealth by investing more in the health of its people. Blessed with large reserves of natural and human resources, Nigeria has already claimed the status of the largest economy in SubSaharan Africa. However, despite steady growth averaging 6.8 percent between 2005- 2015 the government of Nigeria (GON) has struggled to translate growth into higher public revenues. 

In 2016 revenue as a share of GDP was 4.8 percent – the weakest revenue mobilization effort in the world – with severe implications for investments in human capital. Slow progress on poverty reduction, health outcomes, literacy, and governance threaten development as the risks associated with a large youthful unemployed population trapped in poverty can quickly turn opportunity to disaster.

Low government health spending over the last two decades has limited the expansion of highly cost-effective interventions, stunting health outcomes and exposing large shares of the population to catastrophic health expenditures. Nigeria spends less on health than nearly every country in the world. In 2016, government health spending was 0.6 percent as a share of GDP or just $US11 per capita. Funding for primary health care is especially affected as the bulk of spending occurs at the central level and is focused on tertiary and secondary hospitals. 

Coverage of promotive, preventive, and primary health care interventions is low with the universal health service coverage index – defined as the average coverage of tracer interventions for essential universal health coverage – at just 39 percent. As a result, Nigeria significantly underperforms on key health outcomes. Maternal mortality at 576 deaths per 100,000 live births is one of the highest in the world (2.6 times the global average); one in eight children die before reaching their fifth birthday; and 25 percent of households spend more than 10 percent of their household consumption on health. 

Raising additional resources for health will be challenging, especially within the context of the health financing transition. Revenue projections from the International Monetary Fund (IMF) are expected to remain muted, slowly climbing to 7 percent as a share of GDP by 2022. And the federal government’s interest payments as a share of revenue are expected to rise to 78.3 percent by 2022 – crowding out much needed government spending not only in health but other sectors as well. At the same time, many donor institutions currently providing support for the health sector have eligibility criteria that are tied to income and Nigeria’s future access to preferential terms for grants, concessional loans and debt relief will be limited. 

Given this challenging macro-fiscal environment, it is imperative to target limited resources to the health services and populations that would benefit most. Investing in primary health care and expanding coverage of reproductive maternal and child health and malaria interventions would have a significant economic impact on poor Nigerians driven by a healthier, more educated, and more productive young workforce. Seventy-two percent of the burden of disease remains from communicable, maternal, neonatal and nutritional diseases. Many of these conditions could be prevented and treated by highly cost-effective intervention packages. But wide variations exist in service delivery by place of residence, mother’s education, and household wealth.

The basic health care provision fund (BHCPF), mandated by the National Health Act of 2014, is meant to provide the needed financing so that all Nigerians may access a Basic Minimum Package of Health Services (BMPHS). As a noncontributory, predominantly tax-financed scheme, the BHCPF will ensure the most vulnerable populations have access to basic care. On the one hand, it aims to provide primary health care facilities much needed operational budgets to improve their overall capacity to provide basic services as primary health centres have historically received little to no operating budget and frequently lack basic amenities, equipment, and drugs to be able to deliver quality services. 

On the other hand, the BHCPF will provide funding to the existing National Health Insurance Scheme (NHIS) to scale up access to a package of essential health services meant to cover 60 percent of the current burden of disease through accredited public and private providers – improving the coverage of low-cost high impact health interventions. While the resource envelope for the BHCPF would currently be inadequate to guarantee full coverage of the BMPHS to the entire population, the GON’s proposed gradual expansion of the BHCPF is well within reach especially as the economy recovers and the size of the resource envelope increases. 

Social health insurance, often seen as a solution to raising a large and stable revenue for health, should complement the BHCPF but on its own is not a viable path towards achieving UHC. Currently, social health insurance does not have the capacity to enforce contributions or the ability to attract the informal sector. In 1999, the government of Nigeria (GON) established the National Health Insurance Scheme (NHIS) as a public-private partnership to pool health risk and provide greater financial protection to households seeking healthcare. While there has been debate about making NHIS participation mandatory, to date it remains a voluntary contributory scheme. 

As of 2016, only 4.2 percent of the population was covered – predominantly federal government civil servants and their dependents. The informal sector, comprising most Nigerians – including the poorest and sickest individuals – are left to either forgo care when they fall ill or pay out-of-pocket for their health care expenditures. Globally, countries that have chosen a voluntary contributory path have needed to supplement insurance contributions with tax-based financing (like what would be provided by the BHCPF) that pay for poor and vulnerable groups and heavily subsidised premium contributions from the informal sector.

Moving forward, it would be important to understand why NHIS coverage has failed to move beyond the formal sector. The absence of data and information on the health seeking behaviour and preferences of patients provides limited understanding on how to expand coverage. There are many factors influencing the demand for health insurance in developing countries – knowledge of the scheme, proximity to local health care facilities, perceived quality of local providers, and affordability of the premium. A review of NHIS contributions, utilisation, and expenditures and health seeking behaviour of households is needed to help inform the future of contributory insurance in Nigeria.  

Beyond low public financing, weak governance and public financial management directly impact the efficient financing and performance of the health sector. First, inter-governmental fiscal transfers and the NHIS currently reinforce existing regional fiscal and health outcome imbalances, failing to provide adequate financial risk protection to the poorest and sickest households. Second, the absence of a formal mechanism to coordinate and consolidate information on health resources, the cost and use of health services, and health outcomes across the tiers of government (federal, state, and local) and the various ministries, departments, and agencies (MDAs) responsible for the delivery of health services weaken the ability of the Federal Ministry of Health to effectively oversee the sector as a whole. 

Third, realistic revenue projections and perennial delays in the approval of the budget further undermine the efficient allocation and implementation of the health sector budget. Fourth, decentralisation and the stated responsibilities of the three tiers (federal, state, and local) of government in service delivery largely determines where health spending occurs rather than any national strategic health priorities. As a result, spending is skewed towards curative care, especially in tertiary and secondary hospital settings, with little focus on low-cost high-impact areas of prevention, public health, and primary health care. Finally, current provider payment arrangements and infrequent supervision provide little incentive to increase the quantity and quality of care. 

The BHCPF – a federal program – overcomes some of the challenges of existing health financing arrangements. By committing to allocate funds to the BHCPF the GON will be providing additional resources directly to front line providers. However, it must simultaneously introduce strong accountability mechanisms to improve the quality and efficiency of spending. By initially focusing on the rural population where most poor Nigerians live, and ensuring funds reach front line primary health care facilities, the scheme aims to provide greater financial protection to the poorest and sickest households. In addition, as a statutory transfer, the BHCPF ensures that funding for PHCs would be safeguarded guaranteeing that any unused funds that arise because of low demand, poor uptake, delays in the release of funds or in the receipt of claims from providers will be rolled-over to next year’s fund. 

On the public accountability side, the disbursement of funds must be subject to receiving reports on the source and use of funds and incremental improvements in quality assurance. On the social accountability side, the scheme may consider using Ward Development Committees – an initiative made up of volunteer community members advocating for the health and social needs of their communities. Providers should also be required to display a large poster informing patients of the services they are entitled to receive for free and provide contact information for a complaints mechanism. And while discussions of payment systems are ongoing, their careful design could further help create incentives for improved efficiency in the use of health resources.

The sector will also likely require targeted technical assistance to improve the governance and effectiveness of the health financing system in some areas. Measures such as improving the quality and frequency of national/subnational health accounts, and establishing health management and information systems to produce timely and useful information for budget and planning, provider monitoring, and general oversight are needed to strengthen the relationship between public expenditure and health outcomes and to justify additional requests for increased sector funding. Support would also be needed to develop sector specific medium-term expenditure frameworks and sector strategies, improve accounting of donor resources, and provide capacity building and training to a central coordinating structure to better plan and budget across tiers of government and MDAs responsible for delivering health services.


Reem Hafez (2018). Nigeria Health Financing System Assessment. The International Bank for Reconstruction and Development/The World Bank, 1818 H Street, NW Washington, DC 20433 All rights reserved.

Facebook Comments

Leave a Reply