Beyond Hospitals: Financing the MSMEs that Power Nigeria’s Health System

Nigeria’s healthcare financing structure places the greatest burden on those least equipped to carry it. In 2023, domestic private sources financed 74.38% of current health expenditure, while government sources accounted for only 14.34% and external sources provided 11.28% (World Health Organization [WHO], 2025). Out-of-pocket payments alone represented 71.90% of current health expenditure. The problem is therefore not only the level of expenditure, but the heavy dependence on private payments in a system with limited public and pooled financing. Illness consequently creates an immediate financial shock for households and an uncertain revenue base for healthcare providers.

This financing structure weakens both sides of the health system. Families postpone treatment because they cannot absorb the cost. Providers delay investment because patient payments are fragmented and unpredictable. Clinics struggle to expand, diagnostic centres cannot readily finance modern equipment, and pharmacies tie scarce working capital to inventories that may take months to sell.

Health and social work activities accounted for 1.57% of real GDP in 2025, compared with 0.70% in 2014. Despite this increase, the sector remains small relative to the scale of Nigeria’s population and unmet healthcare needs (National Bureau of Statistics [NBS], 2026).

Fig. 1: Health Sector Contribution to Real GDP

Healthcare accounted for 1.57% of real GDP in 2025.

Source: World Bank Development Indicators

Nigeria’s health-financing structure has remained persistently private. Between 2014 and 2023, domestic private sources financed between 72.52% and 78.86% of current health expenditure. Government’s share remained between 13.02% and 16.45%, while external financing ranged from 6.95% to 12.28% (World Health Organization [WHO], 2025). This financing structure limits effective risk pooling, ties access to household liquidity, and leaves healthcare providers dependent on fragmented patient payments rather than the stable revenue needed to invest with confidence.

Fig. 2: Nigeria’s Health Financing Mix

Domestic private sources financed almost three-quarters of current health expenditure.

Source: World Bank Development Indicators

The result is a system in which illness often becomes an immediate household expense. Out-of-pocket payments exceeded 70% of current health expenditure in every year from 2014 to 2023. The ratio reached 77.39% in 2017 and remained 71.90% in 2023. In purchasing-power-adjusted terms, direct household spending per person rose from $126.37 in 2014 to $187.06 in 2023 (WHO, 2025). These figures reveal more than a financing imbalance. They describe a system in which illness can erode household income, delay treatment and weaken the revenues on which providers depend to maintain and expand services.

Fig. 3: Out-of-Pocket Expenditure

Direct household payments remained above 70% of current health expenditure.

Source: World Bank Development Indicators

Nigeria’s healthcare system is sustained by an extensive network of hospitals, primary care clinics, maternity centres, pharmacies, laboratories, medical device suppliers and health technology firms. These enterprises are the operating infrastructure of everyday care. They convert capital into consultations, medicines, diagnostics, equipment and skilled employment. When investment stalls, the consequences appear as longer journeys to care, delayed diagnosis, unavailable medicines and overstretched facilities.

Their financing constraint is structural. Clinics require long-term capital for buildings and equipment but earn revenue through small and uneven payments. Diagnostic centres carry expensive machinery with long recovery periods. Pharmacies commit working capital to inventories before sales are realised. Smaller providers often lack conventional collateral and complete financial records, while imported equipment exposes borrowers to exchange rate risk. Short-tenured, collateral-heavy lending is fundamentally misaligned with the economics of care.

The supply constraint is already visible, and the capacity gap makes investment more urgent. Nigeria had 0.38 physicians per 1,000 people in 2023, equivalent to 3.8 physicians per 10,000 people (World Bank, 2026). Capital health expenditure was only 0.17% of GDP in 2021^[1] (WHO, 2025). The data point to a system that spends heavily on healthcare consumption while investing too little in the productive assets required to expand supply.

[1] This is the latest year available in the series

The healthcare sector does not merely need more credit. It needs finance designed around the assets being acquired, the time required to recover investment, and the cash flows available for repayment. The deeper opportunity is to demonstrate how patient, better-targeted finance can support commercially viable providers while delivering measurable development outcomes. Infrastructure and medical equipment require longer tenors. Uneven provider revenues require flexible repayment structures. Limited collateral requires stronger risk-sharing arrangements to improve participating financial institutions’ appetite. Weak records and governance require technical assistance to turn viable providers into investment-ready enterprises.

DBN’s healthcare portfolio illustrates the potential of targeted development finance. Annual disbursements rose from ₦5.0 million in 2022 to ₦2.53 billion in 2024 and ₦11.10 billion in 2025. The number of healthcare MSMEs financed by DBN increased from 10 in 2022 to 189 in 2024, while supported enterprises contributed 9,978 jobs in 2025. This expansion signals more than portfolio growth. It indicates growing demand for appropriately structured healthcare finance and suggests that viable healthcare enterprises can absorb substantially more capital when financing is better aligned with the sector’s operating realities.

Fig. 4: DBN Healthcare MSME Disbursements[1]

DBN healthcare disbursements increased sharply between 2022 and 2025.

Data Source: DBN

[1] This is the latest year available in the series

[2] Methodological note: Disbursements represent annual cumulative amounts reported for each stated period. MSMEs financed refers to unique beneficiaries/loan transactions. Employment represents jobs created/jobs sustained/total employment supported.

The development return extends beyond the borrower: the value of the intervention lies not only in the naira disbursed, but in the capacity created. A financed diagnostic centre expands testing capacity. A financed pharmacy improves the availability of essential medicines. A financed clinic adds equipment, consultation rooms and skilled jobs. Through participating financial institutions, DBN can combine patient capital, risk sharing and lender capacity to mobilise financing beyond the limits of its own balance sheet. The objective is not simply to fund more providers, but to build a stronger and more investable healthcare market.

Nigeria cannot build broad access to quality care on direct household payments. The financing model must shift towards stronger public and pooled financing, deeper insurance coverage and more suitable capital for healthcare enterprises. Achieving that shift requires coordinated action from government, commercial lenders, development finance institutions and impact investors, with each actor held to measurable outcomes

The actions set out above are mutually reinforcing. Expanded insurance coverage and public financing would give providers more predictable revenues. Specialised lending products would allow viable healthcare enterprises to invest in equipment, facilities and working capital on terms aligned with their operating realities. Development finance institutions can accelerate this transition through patient capital, technical assistance, risk-sharing instruments and blended-finance structures that mobilise private funding at scale.

The imperative is clear: capital must reach the clinics, pharmacies, laboratories, suppliers and technology firms that stand between illness and care. Stronger healthcare enterprises are not a substitute for public health investment. They are indispensable to a health system that can reach more people, withstand shocks and deliver better care.

National Bureau of Statistics. (2026). Nigerian Gross Domestic Product report: Fourth quarter and full year 2025. https://microdata.nigerianstat.gov.ng/index.php/catalog/147

World Bank. (2026). Physicians (per 1,000 people) - Nigeria [Data set]. World Development Indicators. https://data.worldbank.org/indicator/SH.MED.PHYS.ZS?locations=NG

World Health Organization. (2025). Global Health Expenditure Database [Data set]. https://apps.who.int/nha/database/