Seeking Alpha in healthcare: 4 promising investment opportunities along Nigeria’s healthcare value chain

Statistics show that at least 20,000 Nigerians travel to India every year — just to have their medical needs met. 10% of the world’s newborn deaths occur in Nigeria. 63% of the 3,000 doctors trained yearly in Nigeria end up overseas, most of them lured by the prospects of superior compensation and overall better quality of life.

All of the above taken in the context of the measly ₦427.3 billion allocated to Nigeria’s healthcare sector in the 2020 budget (to put this in context, this works out to less than 4% of the entire budget sum, and just over ₦2,000/Nigerian), we arrive at what the experts call “a teeny tiny bit of a healthcare problem”.

No, that’s a bad joke. Nigeria has a huge healthcare problem and for the average Nigerian, this problem transcends the numbers — with the average life expectancy, currently pegged at 55.2 years.

Thus far, Nigerians who can afford to make up for their unmet healthcare needs spend over $1 billion each year on medical tourism.

Not surprisingly though, these problems present unique opportunities for bold investors willing to take risk-adjusted bets on the Nigerian healthcare system.

With Leonine’s experience advising on multiple capital raising and business restructuring mandates in the healthcare sector over the last 2 years, I have identified 4 areas with strong potential to provide superior returns to investors: hospital management, pharmaceuticals, diagnostic services, and health insurance.

Hospital Management: Multinational hospital management firms can capture some of the local demand for care currently being met by overseas hospitals. They can achieve this by exploiting their brands’ international reputation and partnering with high-potential local facilities to provide premium healthcare to Nigerians in Nigeria.

For Nigeria, this will positively impact the foreign exchange environment. It could also mean that many Nigerian health professionals working abroad are encouraged to return at competitive pay levels to help these multinationals combine expertise and superior service delivery with an understanding of the local operating environment.

Pharmaceuticals: The pharmaceutical industry in Nigeria is potentially worth $2 Billion, yet only 8 out of over 130 pharmaceutical companies are listed on the Nigerian stock exchange.

Further, pharmaceutical manufacturing companies in Nigeria have not been able to meet the WHO cGMP standard.

Combined, these shortfalls present investors with an opportunity to support promising companies with a good return potential in leading the certification race in the pharma industry.

Diagnostic services: The demand for equipment such as Magnetic Resonance Imaging (MRI), Computing Tomography scan (CT), ultrasound scan, etc. related to diagnostics have increased since the introduction of the National Strategic Health Development plan (NSHDP) under which the federal government of Nigeria and its institutional partners plan to spend $26.7 billion to give the healthcare sector a major boost.

Beyond imaging, further diagnostic service opportunities exist in nuclear medicine, pathology, and paternity testingWith these demands largely unmet in the Nigerian healthcare ecosystem as it currently is.

Health insurance: Less than 2% of Nigerians have health insurance. This fact, in the context of Nigeria’s rapid population growth, creates opportunities in the health insurance sector, which is currently made up of only 57 companies.

New players must, however, lobby policy-makers and deploy creative insurance models to improve their chances of succeeding due to relatively low-income levels and insurance penetration rates.

In summary, recent events across the globe have once again highlighted the need for Nigeria to devise ways to solve its healthcare challenges.

Asides its tangential long-term benefits for the nation’s human capital development, the industry also presents opportunities for investors willing to do what real investors do — seek out alpha wherever it exists, even when it is hidden within a complex system with more inefficiencies than it can count.

Taking risk-adjusted bets in one or more of the niches highlighted above may just be the deal that creates Nigeria’s first healthcare Unicorn.

Looking to invest in any of the areas listed above? Our financial advisors are a click away from supporting you with best-in-class corporate finance solutions and an in-depth understanding of the local healthcare industry.

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