The Covid-19 pandemic has only served to highlight the deficiencies in Nigeria’s healthcare infrastructure. (Photo by Pius Utomi Ekpei/AFP via Getty Images)

The financial backers of a new Evercare Hospital in the state of Lagos say that its official unveiling on 12 March could herald a new phase of investment in Nigerian healthcare infrastructure.

The 165-bed multi-specialty tertiary care hospital in the city of Lekki has been developed by Evercare Group, a company wholly owned by a $1bn fund managed by TPG Growth. Investors in the fund include development banks such as CDC and Proparco, healthcare operators Philips and Medtronic, and the Bill & Melinda Gates Foundation.

Those behind the project think there is a growing opportunity for foreign direct investment (FDI) in a sector that has long been neglected.

Nigeria left behind on healthcare provisions

Nigeria scores poorly on a variety of metrics comparing healthcare services and infrastructure around the world. According to estate agent Knight Frank, Nigeria requires an extra 386,000 hospital beds at an estimated investment cost of $82bn to bring the country up to the global average of 2.7 beds per 1,000 people.

There needs to be consolidation in the Nigerian healthcare space and I think that can be driven by FDI. Tosin Runsewe, AfyA Care

Rich Nigerians have traditionally avoided domestic hospitals and travelled overseas for treatment, but the Covid-19 pandemic has restricted such movements and put acute pressure on local services.

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Tosin Runsewe, the chairman of the new Evercare Lekki Hospital and the CEO of health sector investment firm AfyA Care, believes enthusiasm for investing in Nigerian healthcare infrastructure is growing. “There will be much more of this type of FDI in the country,” he says.

“There needs to be consolidation in the Nigerian healthcare space and I think that can be driven by FDI. This is a market of 200 million people and at least half of that number can viably pay for healthcare.”

Healthcare investment opportunities in Nigeria

While other emerging markets might see public-private partnerships (PPP) as a vehicle for expanding healthcare infrastructure, such methods are more difficult to adhere to in a market such as Nigeria, where the federal government allocates so little of its budget to the health sector.

Nigeria has by far the largest GDP of any African country, and yet its spending on healthcare is small in comparison with other large economies on the continent. According to the World Bank, health expenditure per capita in Nigeria fell from a peak of $108 in 2014 to just $84 in 2018. This compares with $526 per head in South Africa during the same year.

The PPP model is unviable unless governments are happy to guarantee a steady stream of funding to the private sector investors, which the Nigerian government seems unlikely to do at the scale required.

Real estate investors, however, are increasingly eyeing opportunities in healthcare, given challenges in other sectors.

Hafeez Giwa is a managing partner of HC Capital Properties, a real estate investment firm. He says that the number of square metres of commercial real estate in Nigeria is a fraction of what you see in the US, Europe and the UK, and this deficit is particularly pronounced in healthcare.

Giwa adds that the hospitals that do exist in Nigeria are typically too small, too targeted at wealthy individuals, and developed without an institutional approach.

“The developers will have doctors, clinicians and other medical professionals in their team but they won’t use architects that have hospital development experience,” he says. “Many of these buildings are obsolete as soon as they are completed because the structure and layout wasn’t ideal for the intended use.”

Giwa also says that the capital structure for these projects is often wrong, with the hospitals burdened with too much debt, making it even more difficult for them to provide affordable healthcare.

With other types of real estate investment, such as hospitality and the office sector, less attractive due to the pandemic, investors are increasingly looking at how better returns can be made through healthcare infrastructure.

Will SDG targets drive investment into Nigeria’s health sector?

The need for Nigeria to attract greater investment into its health sector is stark given the standards of care in the country. Analysis by Investment Monitor shows the country is in danger of not achieving the UN’s third Sustainable Development Goal (SDG3), which focuses upon ensuring good health and well-being, by the 2030 target date. The Covid-19 pandemic has exacerbated this issue.

The Health Risk Index 2020 reveals that Nigeria is the country that faces the most risks globally, based on indicators such as life expectancy, infant mortality rates, out-of-pocket expenditure, GDP and number of physicians per capita.

There is now more emphasis on SDGs as a way to measure the value of an investment and there are a lot of impact investors that are prepared to try different models. Andrew S Nevin, PwC West Africa

Gareth Presch, founder of the World Health Innovation Summit, believes that there are significant opportunities for value to be created in Nigeria by adopting a long-term public health policy based on prevention of disease that focuses on achieving SDG3 through pioneering new ways of working within communities.

“Adopting a model that will encourage impact investing in the necessary infrastructure, such as hospitals or digital infrastructure, is key to supporting existing health services to strengthen but also build community resilience,” he says.

Attracting greater FDI in social infrastructure, and more specifically in healthcare real estate, will be needed given the country’s rising population and the lack of public sector resources.

“With respect to social healthcare infrastructure, Nigeria’s public sector has not sufficiently invested in it as there are not enough resources,” says Andrew S Nevin, partner at PwC West Africa. “However, there is now more emphasis on SDGs as a way to measure the value of an investment and there are a lot of impact investors that are prepared to try different models. I think that if Nigeria is prepared to invest in SDG3, it needs to be able to tap these flows to create credible models and credible organisations to attract capital from outside Nigeria, who invest in both human and financial returns.”

Some recent healthcare infrastructure projects in Nigeria include the Abuja Kanu Cardiac Center, being developed by the Kanu Heart Foundation, and the Umuchukwu Orthopaedic Hospital developed by the Las Vegas Pain Institute and Medical Center.

How can healthcare services reach everyone in Nigeria?

Nevin says that what is needed in Nigeria is investment that can reach at least the middle class, or lower middle class, with effective and trustable healthcare at a cost that people can afford. He adds that in the past FDI was focused on a narrow range of wealthier Nigerians who could afford to go abroad for medical treatment.

Runsewe argues that expanding access to health insurance is vital for attracting investment and improving health services in the country. “Expenditure on healthcare here is $15bn annually, and most of that, about 75%, is paid out-of-pocket by patients,” he says. “Less than 5% of the population has health insurance cover. So the opportunity to grow health insurance is massive.”

The company Runsewe founded, AfyA Care, completed series A1 funding in 2020 to raise capital for investments in health services and infrastructure, but its long-term plan is to provide health insurance products. “Over the next five to ten years that 5% coverage can go to 14%, which is better for the hospitals because it guarantees cash flow,” he says. Runsewe adds that a hospital AfyA Care invested in in 2020 makes 60% of its revenues from health insurance, despite the low coverage level among the Nigerian population.

Legislation making health insurance mandatory for certain sections of Nigerian society would likely be needed to facilitate a large expansion of coverage, but this could further catalyse investment in the sector. The Covid-19 pandemic has shown that if Nigeria has any chance of achieving SDG3 by 2030 it needs to attract a lot more investment to fund much-needed improvements to the infrastructure of its healthcare sector.