Bridging the Funding Gap in Healthcare Infrastructure
Doctors in an OR in Lagoon Hospital, Lagos
Brand new, state-of-the-art private hospitals juxtaposed with public hospitals that have not been fully renovated in decades. This stark contrast in Nigeria’s healthcare infrastructure begs the question of whether there is a public-private funding gap. This article aims to explore this question by evaluating recent private and public investment activities in Nigeria’s healthcare infrastructure.
Why is this important?
There is a huge unmet need for investment in healthcare infrastructure in Nigeria and the African continent. A 2020 Knight Frank report indicated that, except for South Africa, all African countries fall short of the global average ratio of 2.7 hospital beds per 1,000 people and require significant investments in healthcare infrastructure to catch up with the rest of the world. Nigeria, for instance, would need 386,000 additional beds and $82 billion of healthcare real estate investments to reach the global average. In comparison, to meet the global average, Egypt, Uganda, and Kenya would need 134,000, 101,000, and 70,000 additional beds, and $23 billion, $11 billion, and $6 billion in healthcare real estate investments, respectively.
The coronavirus pandemic further exposed the shortcomings of Africa’s healthcare infrastructure deficit. For example, before the pandemic ensued, Nigeria only had 350 ventilators and 350 ICU beds for its ~200 million population, most of which were in private hospitals. Similarly, a recent study published in October 2020 revealed that Ghana only had 113 adult and 36 pediatric ICU beds for its ~30 million population, amounting to only 0.5 ICU beds per 100,000 people.
Fortunately, the significant unmet need for funding in healthcare infrastructure has piqued the interest of foreign investors. In June 2020, Knight Frank conducted a poll of over 140 global investors which revealed that, as a result of the coronavirus pandemic, around 80% were now considering investments in healthcare infrastructure in Africa, particularly in healthcare real estate and in collaboration with reputable domestic healthcare service providers.
The pandemic has also triggered domestic fiscal policies to direct investments to the healthcare sector. To tackle the impact of the pandemic, the Central Bank of Nigeria (CBN) issued NGN 100 billion (~$242.7 million) in healthcare loans for pharmaceutical companies and healthcare practitioners to expand and build healthcare infrastructure capacity. The Bank of Industry, a development finance institution operating in Nigeria, pledged a further NGN 50 billion in credit facilities to support healthcare funding.
But there were positive trends in investment in African healthcare infrastructure even before the pandemic ensued. The Investment Fund for Health in Africa-II (IFHA-II) is a private equity fund dedicated to small to medium size (equity) investments in private healthcare companies in Africa. The IFHA-II has support from companies such as Pfizer, the Stichting Social Investor Foundation for Africa, and Swedfund (the Swedish development finance institution). In November 2019, the IFHA-II partnered with the International Finance Corporation, a member of the World Bank Group, to develop a $115 million holding company to acquire and integrate healthcare service businesses in East and Southern Africa.
All this movement in the healthcare investment space on the continent has trickled down into Nigeria’s healthcare sector, in the form of both public and private investments.
What’s going on in the private sector?
Undoubtedly, one of the most newsworthy healthcare real estate investments in Nigeria’s private sector is the Evercare Hospital Lekki in Lagos. Commissioned earlier this year, Evercare Hospital Lekki is a 165-bed multi-specialty tertiary care hospital that offers care across a range of specialty medical and surgical services. The hospital is part of the Evercare Group, a multinational platform of international organizations focused on creating an impact-oriented healthcare ecosystem in growth markets across Africa and South Asia. Evercare Group is wholly owned by the $1 billion Evercare Health Fund for emerging markets and currently operates 29 hospitals, 16 clinics, and over 75 diagnostic centers in India, Pakistan, Bangladesh, Kenya, and Nigeria.
The decision to invest part of the billion-dollar fund in Nigeria in the form of Evercare Hospital Lekki shows significant promise for the growth of Nigeria’s private healthcare industry.
The Marcelle Ruth Cancer Center and Specialist Hospital (MRCCSH) is another noteworthy private sector facility that officially opened its doors in April 2021. With 2 modular operating theatres, an 8-bed outpatient infusion and chemotherapy suite, 15 ensuite inpatient rooms, and modern diagnostic and imaging facilities, MRCCSH aims to make world-class cancer care accessible to Nigerians.
The center was partly funded by Polaris Bank Limited, a commercial bank in Nigeria. Polaris facilitated access to part of the NGN 100 billion in healthcare loans issued by the CBN to support the construction of the MRCCSH. At MRCCSH’s commissioning, Lagos State Governor Sanwo-Olu pledged that the state would donate one specialist cancer center in the next year to add to MRCCSH as well as the oncology center in the Lagos University Teaching Hospital - signaling a public-private partnership to further improve access to quality cancer care for Nigerian patients.
Companies in the private equity space have attracted millions of dollars of investment in healthcare infrastructure to the African continent. One such company is Africa Health Holdings Limited (AHH) - an entity that is committed to acquiring, investing in, and operating healthcare assets across Africa. Over the last four years, AHH has grown its portfolio of healthcare assets to 40 facilities in Ghana, Nigeria, and Kenya, serving more than 135,000 patients annually.
AHH currently owns and manages two multi-specialty facilities in Lagos, Nigeria under the brand CarePoint Healthcare Limited (CPH). CarePoint Ojo (CPO) is a 30-bed facility located in the Ojo Local Government Area (LGA), a low-income suburb in Lagos; CarePoint Hospital Egbeda (CPE) is a 22-bed facility located in the Alimosho LGA in Lagos. Both centers were acquired through an M&A process and AHH invested in a complete overhaul of the infrastructure and operations of each center, including reconstructing the physical infrastructure, upgrading medical equipment, recruiting highly qualified staff, and retraining existing staff. The centers offer a range of healthcare services (e.g., outpatient care, delivery, and maternal services, primary inpatient care, etc.) and attend to an average of 1,500 patients in total per month.
AHH has also invested in digitization and digital health solutions through their MyCareMobile electronic healthcare delivery system. In Ghana, AHH set up virtual consultation rooms in remote areas to democratize access to healthcare, kicking off their first pilot in the Ho Clinic in June 2020, about 150km from the capital city of Accra. Over this period, there was a four-fold increase in patient count and improvement in EBITDA margins, allowing AHH to transfer these cost savings to their patients. This technology was also leveraged in the Makola market facility, a renowned marketplace, and shopping district in the Accra city center, resulting in a 30% decrease in the cost of care.
What’s going on in the public sector?
The general lack of trust in the Nigerian government leads many to believe that there is very little activity in the public healthcare sector. However, there is more activity than one would think, particularly as the government aims to improve healthcare infrastructure beyond the Lagos Metropolitan Area where a lot of private healthcare investments are concentrated.
The Nigerian Sovereign Investment Authority (NSIA) is an investment institution owned by all three tiers of government in Nigeria. The NSIA is tasked with investing Nigeria’s sovereign wealth fund in domestic infrastructure projects and across various financial assets, making returns, and reinvesting the fund - all with the broader strategic plan to stimulate growth and development in the Nigerian economy. The NSIA established a holding company called the NSIA Healthcare Development and Investment Company (NHDIC) to fund several healthcare projects.
As a result of a $12 million direct investment from the NHDIC, the NSIA-LUTH Cancer Center (NLCC), a full-service outpatient cancer center, became operational in May 2019. Since the inception of this project, the NLCC has attended to over 2,000 patients and offers over 300 chemotherapy regimens and high-tech radiotherapy treatment using state-of-the-art equipment (e.g., 2 Varian vital beams, brachytherapy equipment, GE CT scans, etc.). The NHDIC invested a further $10.5 million and opened two diagnostic centers in March 2020 - the NSIA Kano Diagnostic Center, located in the Aminu Kano Teaching Hospital, and the NSIA Umuahia Diagnostic Center, located in the Federal Medical Center Umuahia. Both centers offer a wide variety of diagnostic services (e.g., lab, radiology, general pathology, MRI, and CT scans).
The NHDIC plans to expand these projects and is aiming to develop more cancer centers, diagnostic centers, and CATH labs in each geopolitical zone in the country. Before these NHDIC healthcare projects, Nigeria only had one functional radiotherapy machine. Soon, high-quality cancer diagnostics and medical care will be available to Nigerians at public hospitals across the country. Not only do these projects aim to improve Nigeria’s public healthcare infrastructure, but they also have a social impact to reduce the 40% of medical tourism driven by oncology in the country.
Is there a funding gap?
While there seems to be more investment activity in the private sector, most of these investments are highly concentrated in the Lagos Metropolitan Area. The public sector investments focus on closing the gap in the quality and accessibility of healthcare services between Lagos and other regions in the country. As such, although the level of healthcare investment is nowhere near where it needs to be to fill the $82 billion gap, the private and public investment efforts point to an increasing focus for investors in the healthcare sector.
What are the opportunities and challenges with healthcare infrastructure investment?
With a population of over 200 million people, the Nigerian market offers huge potential for investment in healthcare infrastructure for both domestic and foreign investors. And with increasing globalization comes growing rates of non-communicable / chronic diseases in the country, leading to an increase in demand for healthcare services, both in primary and tertiary care. The growing digital health and health tech spaces are rapidly bringing new technologies and innovation to Nigeria that make healthcare provision more efficient, potentially offering significant growth opportunities for investors.
However, several challenges exist that create barriers to attracting investment in healthcare infrastructure to Nigeria. Low insurance coverage rates and high out-of-pocket healthcare expenditure prevent Nigerian patients from accessing quality healthcare, particularly preventive care. Additionally, low government expenditure on healthcare often leads to poor maintenance of healthcare facilities, particularly in the public sector, slowly deteriorating the quality of healthcare provision over time. These challenges undermine the foreign investment efforts and need to be addressed to continue to attract healthcare investment to Nigeria.
Key Takeaways from TC Health: The Nigerian government should adopt tailored policies to overcome hurdles in the domestic economy that hinder the inflow of foreign direct investment, particularly in the healthcare sector. Such policies should aim to improve the ease of doing business, access to high tech imports (e.g., medical technology and equipment), and increased competition among domestic companies, with the goal of creating an economy that is attractive to foreign investors and enables spillovers from these investments into the domestic economy. Beyond foreign investments, efforts should also be directed to retain domestically trained medical personnel and attract those in the diaspora in order for the supply of highly trained personnel to match the demand created as investments in healthcare real estate increase.
