It’s no secret that Nigeria’s health sector is struggling to attract investors and better service delivery. Healthcare continues to fluctuate and the drive backdrop is evolving. The sector, over the last five years has consistently lagged behind with the minimum requirement of allocating 15 percent of the total annual budget to improve the health sector, despite being a signatory to the 2001 African Union Abuja Declaration.
Health professionals and industry analysts revealed that both groups recognize attracting investors will be a challenge going forward. Many are taking steps to do something about it—but others aren’t as far along. To recover investor confidence and capital, Nigeria’s health sector oil should continue looking for new ways to change their game.
Who are your investors, and who are your peers?
Investing in the health system not only saves lives, it is also a crucial investment in the wider economy. Healthcare investing requires a multifaceted approach to understand the underlying drivers. Investors can profit from investments in both the overall sector and/or its industries.
Who are the investors? The unfortunate reality is that those who have historically invested in Nigeria’s health, such as growth investors, are no longer interested in the industry. Meanwhile, investors see Foreign Direct Investment (FDI) in Nigeria as a necessary medium for deals in hospitals and clinics to enhance treatment abilities, improve in medical technologies advancement are a booming development and boost the healthcare services in Nigeria.
The value investor. This fundamental shift highlights an obvious connect, to provide clarity for a path forward. It may also help to redefine your peers group in broader health financing and market.
What matters to the value investor?
The value investor cares most about dividend-steady yields without risk. With pools of capital, loans from banks, endowments, sovereign wealth funds, the providers of this capital primarily aim to maintain the value of the funds and stay ahead of inflation. This is a significant risk/reward equation to manage, and as a result, value investors are geared to seek minimal volatility and steady returns.
Reshape the healthcare sector to ensure earnings through Foreign Direct Investment (FDI) and Combining public private partnership (PPP), to enhance market space.
The sector needs to find ways to consistently generate remittances from the diaspora and public private partnership harness in healthcare investment opportunities in Physiotherapy Centre, Ambulance Service, Chest Medicine, Molecular Laboratory, Intensive care unit, Oncology center, Medical and nursing school. This will enable healthcare investors and providers to deliver the type of results which analysts believe are required to attract investment and improve service delivery.
How to attract value investors
Fitch Solutions report revealed that Nigeria’s medical device market will record double-digit growth in local currency and will grow at a 2017-2022 CAGR of 9 percent to reach $184.4 million by 2022 and predicts healthcare expenditure to reach N5, 762.061bn by 2021 at CAGR of 8.35%.
“The Nigerian medical device market will witness a strong growth rate in the medium to long-term future driven by improved economic conditions and the introduction of a foray of new companies with technological advancements,” Research and Markets also predicts.
Nigeria is expected to grow more in the share medical device market. This is owing to rising intravenous usage of technology in the state and the rising cost of healthcare, which stimulated the development of innovative connected products.
How investors can gain a level and complete understanding of revenue and costs
To deliver competitive earnings regardless of cost of device swings, the industry needs to look deeply at real costs and revenue at the most smooth level, in ways few in the industry have done previously.
According to the Nigerian Investment Promotion Commission, a myriad of investment opportunities exist across the healthcare value chain in Nigeria and investors interested in taking advantage of these opportunities will benefit from taking a long-term view of the market and keeping in consideration the dynamics of healthcare investment in developing nations.
Getting a smooth vision can likely enhance management’s ability to take stronger control of financial and operational performance, to inculcate confidence in value investors.
Industry experts and analysts say Nigeria’s health sector remains a good and attractive industry to do business with huge opportunities and high profit margin up to 70 per cent.
“More investment will bridge the noticeable gap and also help in eliminating the issue of medical tourism, analysts say.
Improve cost management
Better and more finely-tuned cost management can happen after the healthcare investor has examined the profitability of all activities and assets. Cost management assumes different forms, in managing assets for higher uptime and supporting top-performing activities.
Ola Brown, managing director of Flying Doctors Nigeria says the health care sector has capacity to generate revenue than crude oil in Nigeria, and contribute significantly to the Gross Domestic Product (GDP).
In her analysis, investing in the health care sector can also generate employment and foreign exchange. She argued that the health care sector has generated huge revenue in some developed and developing countries across the world.
She said export of health care services is Cuba’s mist hard currency earner, and the revenue is expected to double to over $16bn due to the pandemic, higher than Nigeria’s revenue from crude oil
Brown also disclosed that a health care industry in the US generated revenue to the time of $4bn higher than Dangote’s revenue of $2 billion. She added that four of the top 10 companies in the US are health care companies.
“Health sector should not just be seen as a charitable or philanthropic investment, but should be seen as a real business capable of bringing in revenue, employment, foreign exchange and making Nigeria wealthier as well as healthier”, she said.
Partner to raise your tech game
Advancements in technologies (including artificial intelligence, virtual and augmented reality,more importations in highest demand of supplying magnetic resonance imaging, Radiotherapy machines, digital X-ray, ultrasound and mammography machines, CT- Scans and anaesthesia kits.
While the healthcare industry has been a vanguard of science and technological innovation in many respects, these areas hold great potential as Nigeria looks to expand health care access and coverage and are becoming powerful tools to streamline operations, unlock and identify new opportunities.
Too many healthcare investors still take a “not invented here” approach to innovation. Instead, many continue to develop proprietary technology which can be more costly and time-consuming than partnering with companies with specialized solutions. By partnering with trusted providers, healthcare facilities can stay focused on the core needs of the business and make their operations and use of capital more efficient.
To continue attracting capital in an increasingly competitive market, Nigeria’s healthcare needs to become more enticing to value investors, whose priorities are clear. A new strategy should be considered—one that centers on prioritizing reliable shareholder returns through effective capital deployment and reliable operational performance to position them for continued profitability. This is a big change for the industry and may mean changing a corporate mindset and culture and possibly acquiring new skills altogether.