Nigeria’s 2022 government budget reflects an upward trend in health funding but it still falls below the level stipulated by the Abuja Declaration to which Nigeria is a signatory, according to Fitch Solution.
Parliament, in December 2021, approved a budget of NGN711.3 billion earmarked for the Ministry of Health (MOH) for FY2022, with capital budget standing at NGN194.6 billion (US$0.5 billion), while recurrent expenditure is at NGN504.0 billion (US$1.2 billion).
Fitch’s assessment of the budget allocation to health, indicates an increase of 29.4 per cent year-on-year in local currency terms, making the budget for the ministry the highest since President Buhari assumed office in 2015.
Additionally, capital expenditure will grow by 47.7% year-on-year, indicating the building of new hospitals in rural areas which “we believe will improve healthcare access over the long term.”
On the whole, the increase in spending will benefit the quality and coverage of healthcare in the country, creating opportunities for healthcare providers as well as pharmaceutical companies.
Abuja Declaration
Despite the positive impact on public health, the health budget falls far below the 15 per cent Abuja Declaration, which Nigeria is a signatory.
The Abuja Declaration sets a benchmark for health sector budget allocation at 15 per cent of total budgetary spending across African Union (AU) countries with the aim of improving healthcare in the region.
“We note, however, that although countries such as Rwanda and South Africa have managed to significantly boost their healthcare budget allocations of between 10-12%, most countries have failed to meet this commitment. In particular, Nigeria lags far at 4.3%”.
Fitch
Furthermore, Fitch highlighted that Nigeria’s healthcare spending in per capita terms remains low in the region. Fitch estimates prove that healthcare spending in the country is equal to around US$79.7 per capita, with public spending accounting for only about 15.8% of this.
This is below the sub-Saharan Africa (SSA) average of US$83.2, reflecting how little Nigeria is currently spending on healthcare.
Healthcare to limit opportunities
According to Fitch, the frequently underfunded health sector will therefore continue to limit commercial opportunities for healthcare providers and multinational drugmakers in the year.
Thus, generic drugs will remain dominant in the Nigeria’s drug market, especially given the country’s efforts to achieve universal healthcare while keeping costs low, Fitch said.
Fitch also indicated that Nigeria’s tight fiscal position will continue to limit spending. Fitch’s analysts expect the recent uptick in hydrocarbon prices to continue over 2022, rising from a low of US$53.6/bbl in 2015 to US$72.0 bbl in 2022.
Considering that the crude oil industry accounts for over 70 per cent of government revenues in Nigeria, this will have a significant impact on government revenues, Fitch said. Nonetheless, healthcare is not viewed as political priority and has historically showed limited variation with revenues in Nigeria.
Fitch therefore expects that the healthcare market will remain seriously underfunded over our forecast period to 2031, increasing from NGN1.0 trillion (US$2.5billion) in 2021 to NGN2.6 trillion (US$5.3 billion) by 2031. This translates into a CAGR of 10 per cent in local currency terms and 8 per cent in US dollar terms.
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