When allocation is not enough: Rebuilding Nigeria’s health system through fiscal reform and private capital

The recent disclosure that just ₦36 million, not billion, was released from a ₦218 billion federal health capital allocation in 2025 captures the crisis with brutal clarity. Chronic under-execution, erratic release patterns, and deeply unfulfilled budgetary commitments have become structural features of health financing. In a country of over 200 million people, grappling with infectious diseases, rising non-communicable illnesses, and one of the world’s highest out-of-pocket health expenditures, this is not merely a fiscal anomaly; it is a national emergency.

Over the past decade, Nigeria’s health capital allocations have oscillated between ambition and neglect. Some years suggested intent: ₦134 billion, ₦194 billion, and even ₦434.8 billion in 2024. Yet actual releases tell a more sobering story: 53 percent in 2016, 65 percent in 2017, 30 percent in 2023, 15 percent in 2024, and now a near-total collapse in 2025. Even allowing for bureaucratic timing and fiscal pressures, the pattern is unmistakable. We are budgeting for transformation but funding only survival.

“Private capital is cautious where policy is unpredictable, reimbursement uncertain, and regulation opaque. If Nigeria wants private investment at scale, it must deliberately design an environment that reduces risk and rewards performance.”

This is not simply a problem for the Ministry of Health; it reflects the deeper architecture of Nigeria’s public finance system.

The fiscal architecture behind the gap

Nigeria’s revenue base remains narrow and volatile. Oil receipts still dominate federal income, exposing public spending to global price swings. When revenues fall short, or when debt servicing rises, capital expenditures are the first casualties. Health, despite its rhetorical centrality to development, is not protected from fiscal turbulence. Debt servicing now consumes an extraordinary share of federal revenues. Recurrent expenditures—salaries, overheads, and subsidies—crowd out long-term investment. Health infrastructure, equipment procurement, digital systems, and facility upgrades are deferred. Capital budgets are announced; releases are rationed. The result is not just underfunding, but unpredictability. And in health financing, unpredictability is as damaging as scarcity. To its credit, the Ministry of Health has shown strategic ingenuity under these constraints, pushing insurance reforms, revitalising primary healthcare, and piloting digital health initiatives. Leadership under scarcity deserves recognition. But ingenuity cannot indefinitely compensate for systemic instability.

What the evidence tells us

Global experience is unequivocal: sustainable health systems are not built on episodic budget injections. They rely on predictable, pooled financing and institutional protections that shield health spending from political and economic cycles. Countries that succeed do not stumble into effective health financing; they design it deliberately. They diversify funding sources, enforce accountability, and align public objectives with private capacity. Development occurs neither when the state retreats entirely nor when it monopolises delivery but when incentives are aligned and performance is enforced.

The lesson for Nigeria is clear: reform must focus not only on how much we spend but also on how we structure spending and who we enable to invest.

Learning from scarcity and from success

Countries that faced constraints similar to Nigeria’s chose institutional reform over improvisation. Rwanda expanded access through community-based insurance and performance-linked financing. Thailand consolidated fragmented funding streams to guarantee universal coverage despite limited fiscal space. Brazil’s constitutionally protected health spending floors to insulate the sector from political volatility.

Even in advanced economies, private capital plays a critical, although regulated, role. Publicly financed systems in the UK and Canada rely extensively on private providers and infrastructure partnerships. Israel blends public funding with competing non-profit health funds and supplementary private insurance, preserving universality while fostering innovation.

Closer to home, South Africa and Egypt demonstrate how private hospitals and medical schemes can expand infrastructure capacity and technological sophistication even when public budgets are strained. The takeaway is not to replicate any single model wholesale but to recognise a common principle: diversified financing creates resilience.

Nigeria’s untapped advantage

Nigeria’s private healthcare sector already exhibits enormous potential, with world-class hospitals in major cities, expanding health insurance schemes, growing diagnostic networks, and a fast-evolving digital health ecosystem. The constraint is not capability; it is alignment.

Private capital is cautious where policy is unpredictable, reimbursement uncertain, and regulation opaque. If Nigeria wants private investment at scale, it must deliberately design an environment that reduces risk and rewards performance.

A blueprint for private capital in health

Four reforms are critical:

First, establish dedicated health infrastructure investment vehicles that pool private capital, development finance, and institutional investors to finance hospitals, diagnostics, and specialty care—using blended finance, guarantees, and outcome-linked bonds.

Second, expand and standardise public-private partnerships in health. The government can contribute land, guarantees, or minimum-revenue assurances, while private partners build, operate, and innovate under clear performance contracts.

Third, strengthen health insurance as a capital engine. Expanding pooled, prepaid financing—especially into the informal sector—creates predictable cash flows that enable providers to invest in infrastructure and technology.

Fourth, deploy targeted tax incentives: accelerated depreciation for health infrastructure, tariff relief on medical equipment, and capital gains concessions for investments in underserved regions.

Technology must be part of this strategy. Telemedicine, diagnostics, interoperable data systems, and AI-enabled care offer Nigeria a chance to leapfrog infrastructure gaps—if regulation is enabling rather than obstructive.

Guardrails matter

Private sector participation must be anchored in strong regulation: transparent pricing, enforceable quality standards, performance-linked reimbursement, and consumer protection. Without these, private capital can deepen inequity. With them, it becomes a force multiplier for public goals.

The bigger fiscal question

None of this can be separated from broader fiscal reform. Nigeria’s low revenue-to-GDP ratio continues to constrain social investment. Without tax reform and revenue diversification, health will remain trapped in zero-sum budget battles.

Health is not consumption; it is productivity. A chronically underfunded health system is not just a social failure; it is an economic liability.

A moment for alignment

Despite funding volatility, the Federal Ministry of Health has shown resilience and strategic patience. That leadership deserves acknowledgement. But leadership alone cannot overcome structural fiscal weaknesses.

This is why the Healthcare Federation of Nigeria’s annual conference, holding March 4–5 in Lagos, matters. It must become more than a professional gathering. It should serve as a financing summit, bringing government, investors, insurers, development partners, and innovators together to forge a national compact: protect baseline public funding; expand insurance pooling; unlock private infrastructure investment; and institutionalise accountability.

The numbers from 2016 to 2025 are cautionary. The decade ahead must be transformational. Health systems are not built by speeches or spreadsheets alone. They are built when fiscal architecture aligns with national purpose when public leadership and private capital move in disciplined partnership. The resources exist. The expertise exists. The need is urgent.

The question is whether Nigeria will choose reform over repetition.

The conversation begins and must lead to action in Lagos this March.

This article is a partnership between the Healthcare Federation of Nigeria (HFN) and BusinessDay to highlight policies and programmes to promote the rebuilding of Nigeria’s health sector. As a private sector-led coalition, HFN advocates for policies and partnerships to strengthen healthcare delivery. This partnership aims to spark meaningful discussions and drive transformative change in Nigeria’s health sector.

This article was developed with input from members of the HFN Editorial Committee, including Njide Ndili (President of HFN and Country Director of PharmAccess) and Dr Folajimi Adebowale (CEO, Recon Health Media)