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Income inequality and funding in the health sector in Nigeria

In one of the most unequal countries in the world, the poor people spend nine times more on health services than the wealthy. The solutions to this problem may lie in the payment of income tax.

Por: March 29, 2024

In the bustling cities and villages of Nigeria, where vibrant cultures intertwine with the challenges of daily life, the tale of healthcare unfolds with both resilience and struggle. In this diverse nation, the escalating income disparity casts a shadow over the healthcare system, affecting the lives of everyday people.

Picture a bustling clinic in Lagos or a quiet hospital in Kano—these are not just facilities but the heartbeat of communities grappling with the consequences of income inequality. The lack of sufficient funding for the health sector, coupled with high income inequality, paints a stark picture. The heartbeat falters as lower-income individuals face barriers to accessing medical care, navigating a landscape where government hospitals and clinics grapple with inefficiencies.

It’s not just about numbers; it’s about the elderly woman in Abuja who can’t afford her medication or the young family in Enugu facing tough choices between healthcare and putting food on the table. This isn’t just a narrative confined to Nigeria; it resonates globally.

Income inequality, recognized as a formidable force hindering growth, intertwines with inadequate funding, creating a vicious cycle that hampers social cohesion and overall development. From the crowded streets of Lagos to the rural landscapes of Owerri, the consequences are tangible—poverty, social unrest, compromised health outcomes, and weakened economic growth. In Nigeria, poor people spend about 9 times more on health costs than wealthy people. This is the tragic result of the combination of different factors, including income inequality and inadequate funding of the healthcare system. 

As we study the intricate tapestry of Nigeria’s healthcare challenges, it becomes evident that the story extends beyond statistics and academic discourse. It is about the resilience of individuals, families, and communities in the face of a system strained by inequality and insufficient resources.

Unequal Nigeria: navigating the crossroads of income inequality and healthcare challenges

Despite a continuous rise in government expenditure from N166.11 billion in 1985 to N501.01 billion in 2019, slightly dropping to N445.68 billion in 2021 (World Bank 2022), and Nigeria’s status as the 7th largest oil producer and exporter with the highest average real GDP growth rate of 7.0 in Africa, the nation grapples persistently with high rates of income inequality and abject poverty (Kaplan et al., 1996; Sala-iMartin, 2006; Ohimain, 2010; Chude and Chude 2013). This paradox is accentuated by Nigeria’s Human Development Index (HDI), which stood at the 163rd position among 177 countries, a stark contrast to the 151st position in 2002. The decline places Nigeria among the lowest in providing basic human development indicators such as Health (Life Expectancy at Birth), Standard of Living (Income Index), and Education (Education Index) according to the World Bank (2022). The repercussions of this economic paradox extend deeply into the health sectors of developing nations. In Nigeria, where the health sector faces challenges of both income inequality and inadequate funding, access to healthcare services becomes a precarious balancing act. The lack of sufficient funding, coupled with high income inequality among the populace and inefficiencies in government hospitals and clinics, has particularly impacted the health status of the population. Lower-income individuals, in particular, encounter obstacles in accessing medical care, leading to compromised health outcomes. 

The Human Poverty Index (HPI) for Nigeria in 2020 was 38.8%, placing the country at the 75th position among 103 developing nations (Luke et al., 2020) and among the 20 poorest nations globally (World Equation Organization (WEO, 2018). Presently, Nigeria is one of the countries with the highest levels of inequality in the world as shown in the table 1 & 2 below  with other countries (World Bank 2019) and has about 63% of its population categorized as multidimensionally poor (National Bureau of Statistics, 2022).

On average, the Gini index, a measure of income inequality over the past five years, stood at approximately 0.49. To put this into perspective, the wealthiest individual in Nigeria can earn 8,000 times more in one day than what the poorest 10% of Nigerians typically spend on their basic consumption in an entire year. Analysis of the nation’s income distribution by income quintile reveals that in 2018 the poorest 20% of the population shares only 7% of the total national income, in stark contrast to the top 20%, which commands 42% of the income share (World Bank, 2019). These statistics underscore the significant income disparities between the impoverished and affluent segments of the population.

The low health public expenditure

As of 2020, Nigeria’s domestic general government health expenditure is at 14.97% out of the total 4.2% earmarked for health expenditure in the budget. While 82.7% of the health budget is to be spent on salaries, wages and running offices, only 10.9% will be spent on the repairs and construction of the health care facilities, and provision of drugs, and medical equipment across the health care facilities in Nigeria therefore making individuals pay heavily for their healthcare which further causes a huge difference in the quality of healthcare services they receive as well as creating income disparities between the poor and the rich. But that is not the case with other Sub-Saharan nations.

For instance, in 2020, general government health expenditure in Angola accounts for 42.06% out of its 6.7% out of the total allocation for health sector, for Botswana 74.71% of their total health budget of 32%, in South Africa 62.1% out of its 11.6% of total health expenditure and in Gabon 55.43% out of the 24% of total health expenditure (World Health Organization, 2022, World Bank, 2023). All these indicators point to the efforts of public funding and its impact on reducing the cost of healthcare (out-of-pocket) expenditure to their citizenry. From this information, it shows the significant challenge Nigeria’s health sector faces in adequately funding public healthcare which has continued to exacerbate income inequality and heavy reliance on out-of-pocket payments.

In 2020, it shows that Botswana has the highest percentage of domestic government health expenditure of 74.71% followed by South Africa (62.1%), Gabon (55.43%), Angola (42.06%) and Nigeria (14.97%). The implications of these disparities in domestic government health expenditure shed light on the divergent commitment to healthcare financing among these nations. Botswana’s substantial allocation of nearly 75% of its domestic general government health expenditure reflects a strong commitment to the well-being of its population. On the other hand, Nigeria’s comparatively low percentage shows a significant challenge in adequately funding domestic general health expenditure, potentially affecting high income disparities between populace as well as the quality of healthcare services offered in the country. 


it is evident that Nigeria has the largest percentage of out-of-pocket expenditure in health care services and Botswana the lowest. This contrast in funding holds profound implications in the accessibility, affordability and overall effectiveness of healthcare services. For Nigeria, this reality will put pressure on low-income earners thereby exacerbating poverty and lower per capita income, amongst other things. In Nigeria, public health funding constitutes an estimated 20% of the total healthcare funding, with private healthcare payments representing the largest portion of healthcare financing in the country (World Bank, 2022).

Out-of-pocket (OOP) payments for healthcare, the predominant form of private health financing, make up approximately 74.68% of the total healthcare funding in Nigeria, a figure higher than that of other sub-Saharan countries with lower GDPs. For comparison, Angola allocates 37.14%, Gabon 20.13%, South Africa 5.36%, and Botswana 4.64% to OOP payments for healthcare (World Bank, 2022). Given the limited public funding of health care, the incidence of direct health care funding in Nigeria rests disproportionately on the poor households. These households, in comparison to their wealthy counterparts, spend about 9 times more of their per capita total expenditure on OOP health care (Olaniyan et al., 2020). This concerning scenario has implications for essential services, particularly public healthcare funding, which remains woefully inadequate. 

This indicates that inequities exist in the Nigerian healthcare financing system. These inequities are marked by individuals with similar income making different health care payments, the notion of horizontal inequity, changes in the position of individuals on the income distribution due to health care payments referred to as income reranking and individuals with different abilities to pay not being treated fairly, also referred to as vertical inequity.

Some of the major effect faced by the public healthcare system as a result of this income disparity include; poor healthcare services rendered by the public hospital board, lack of essential equipment to carry out diagnostic analysis of patient, poor healthcare welfare, mass migration of medical workers to other developed countries such as Canada, United Kingdom, United States of America amongst others. While Nigerian immigrants account for one of the highest numbers of healthcare workers in the United States and Canada (Premium Times, 2023), within the country there is a ratio of 4 physician to 10,000 people (ICIR, 2022) far from the WHO-recommended of 600 patients to 1 doctor (Vanguard, 2022). 

Additionally, Nigeria has a total of 38,645 operational hospitals and clinics. This number combines private and public hospitals across the primary, secondary and tertiary levels of care with private clinics accounting for 26% while public hospitals and clinics account for 74% (Nigeria Health Facility Registry, 2022). What this implies is that, based on Nigeria’s population, Nigeria has an average of 17 health care centres to 100,000 persons with Nassarawa State taking the lead and Lagos having the highest number of private hospitals (Data Drive, 2022).

The outcomes of this scenario encompass Nigeria’s relatively low life expectancy rate – 55.75 compared to other countries such as South Africa 64.88, Gabon – 67.03 and Botswana. And also, high child and infant mortality which is currently at 54.740 for every 1000 birth as against some countries within the Sub-Saharan region with low child and infant mortality rate such as Angola; 53.409, Botswana; 26.744, South Africa; 23.573 and Gabon with 31.049 deaths. (United Nations – World Population Prospects 2022). Additionally, delays in the timely transportation of emergency patients for proper medical care, and an increase in the presence of unqualified individuals (quacks) assuming roles as doctors or health practitioners. Regrettably, these elements have resulted in numerous preventable deaths mostly among rural residents. The fundamental origins of these difficulties can be linked to insufficient funding for the health sector and disparities in income, particularly impacting rural inhabitants who face challenges in accessing essential healthcare services due to financial constraints. Dominic (2023).

Summary and key recommendations

Addressing health care financing inequities is a critical policy concern, particularly in developing nations like Nigeria characterized by pronounced income inequality and predominant out-of-pocket (OOP) medical expenses due to limited health insurance accessibility (Chukwedo et al; 2020). The health care financing choices contribute to the exacerbation of income inequality at both national and sectoral levels within the country. Consequently, according to researchers such as Chukwedo et al; 2020, it is recommended that enhancements be made to the National Health Insurance Scheme (NHIS) operations to ensure expanded health care coverage for the impoverished. Furthermore, George Schieber et al; 2006 posited that it is crucial to allocate sufficient funds in annual fiscal budgets, revenue collection, and social insurance to cover a broader spectrum of health care expenses, especially for those with lower incomes. Additionally, Zemichael G et al; 2022 agreed that extending healthcare services to numerous rural communities across the country is essential This involves providing substantial incentives for trained medical professionals to mitigate the efflux of healthcare workers from Nigeria, commonly referred to as “Japa” (Andrew F. et al; 2021).

Lastly, according to  Dominic (2023), a medical practitioner with the Royal College of Emergency Medicine, part of the strategic approach to addressing the gap in healthcare in Nigeria should include effective health financing strategies through means such as income tax collection. He believes that personal income tax should align with the economic reality of individuals, with higher-income earners contributing more, while those with lower incomes pay reduced or proportionate taxes. This approach is aimed to make healthcare services affordable and readily financially accessible to the less privileged as well as activate the process of wealth distribution across the country.

In summary, addressing these issues effectively, we must not only understand the economic intricacies but also recognize the human faces behind the statistics—the faces of those striving for a healthier, more equitable future in the heart of Nigeria and beyond.

This global blog was written by Joseph Miracle Abu, Global South Fellow from Tax Justice research line at Dejusticia. 

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