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8/2/2019 Industry Insights -Issue 04
http://slidepdf.com/reader/full/industry-insights-issue-04 1/12
Major Economic Indicators:
Quarterly Outlook
Inflation: Negative
Interest Rates: Stable
Exchange Rates: Stable
GDP Growth: Positive
Equity Markets: Negative
The Macro
Economy
The Nigerian economy continued to record
moderate growth despite a slowdown in key
industrial economies across the world and
political unrest in the Middle East and North
Africa (MENA) regions. Data provided by the
National Bureau of Statistics (NBS) reveals a
7.4% growth in real gross domestic product
(GDP) in Q3 2011, compared to the 7.86%
recorded in the corresponding quarter of
2010. The slight decline in Q3 2011 GDP rela‐
tive to the 2010 period is largely attributable
to a decrease in activities in the Oil & Gas sec‐
tor. The economy was largely driven by the
activities in the non‐oil sector (particularly
agriculture), which recorded an 8.81% growth
in the third quarter of 2011. The agricultural
sector benefited from favourable weather
conditions which resulted in a significant boost
in crop production during the period. Real
agricultural GDP growth stood at 5.82% in Q3
2011, as against 5.68% in the corresponding
quarter of 2010. In addition, the sector re‐
corded gains from various government inter‐
ventions, particularly the agricultural credit
schemes initiated by the Central Bank of Nige‐
ria (CBN)1.
In spite of the relative peace in the oil‐
producing Niger Delta region, crude oil pro‐
duction output declined, as a number of oil
producing companies faced operational chal‐
lenges. The average daily production dropped
to 2.36 million barrels per day (mbpd) in Q3,
compared to the 2.49 mbpd achieved in the
same quarter of 2010. As a result, the oil sec‐
tor contribution to real GDP declined to
14.27% in Q3 2011 (Q3 2010: 15.38%).
Gains recorded in other sectors of the econ‐
omy include manufacturing (8.15%), telecom‐
munications (35.11%), wholesale/retail trade
(11.84%) and finance & insurance (3.98%). Our
outlook on GDP for both Q4 2011 and Q1 2012
remains positive, as we expect oil production
to remain relatively stable and good perform‐
ance in the non‐oil sector.
Contents
The Macro Economy P.1
Maritime P.4
Downstream Oil & Gas P.6
Food & Beverage P.8
Private Medical Services P.10
QUARTERLY REVIEW OF NIGERIAN INDUSTR
Industry Insights
Agusto & Co.RESEARCH, CREDIT RATINGS, CREDIT RISK MANAGEMENT
ISSUE 04, DECEMBER 2011
1
In November 2011, the NBS disclosed plans to
change the base year for Nigeria’s GDP to 2008
from 1990 in January 2012. The GDP rebasing is
expected to
result
in
a significant
increase
in
the
size of the country’s economy. The Statistician‐
General noted that the change aims to reflect the
current structure of the Nigerian economy, taking
into account changes that had taken place since
1990, such as the emergence of a vibrant telecom‐
munications sector.
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‘ ...lending rates
trended upwards
in line with
tighter money
market condi ‐
tions, to stand at
23.32% in Octo‐
ber
...’
Inflation
Inflationary pressures remain a major con‐
cern for monetary authorities, with head‐
line inflation rising to 10.5% in October2
from 10.3% recorded a month earlier.
Similarly, food
inflation
figures
trended
upwards, to stand at 9.7% in October
2011, compared to 8.7% recorded in Au‐
gust 2011. We expect inflation in Q4 2011
to remain elevated, given the festive end
year activities. In addition, given the high
global commodity prices, continued de‐
pendence on importation, particularly
food products and government’s planned
removal of fuel subsidy, we expect higher
inflation figures in Q1 2012.
Monetary Policy
Subsequent to the significant increase in
the monetary policy rate (MPR) in October
2011, the monetary policy committee
(MPC) retained the MPR at 12%. According
to the data released by the CBN, the aver‐
age interbank call and Open Buy Back
(OBB) rates both opened at 10.74% and
10.63% on 19 September 2011 and rose to
17.09% and
14%
respectively
on
15
No
‐
vember 2011. Similarly, lending rates
trended upwards in line with tighter
money market conditions, to stand at
23.323% in October 2011. Provisional data
from the CBN suggests stronger credit
growth in the economy, with aggregate
domestic credit (net) growing by 24.57% in
October 2011, translating to an annualized
growth rate of 29.48%. This growth is
largely attributable to the increase in pri‐
vate sector
credit.
Going
forward,
Agusto
& Co. expects interest rates to remain
relatively stable, but with occasional vola‐
tility as a result of the CBN’s monetary
policies.
Financial Markets
Investor apathy has had a severe negative
impact on the financial markets in the
second half of 2011. The Nigerian Stock
Exchange (NSE) All‐Share Index (ASI) de‐
clined by
over
19%
year
to
date,
falling
below the 20,000 mark to 19,841.31pts on
14 December 2011. Market capitalization
also declined by 19.2% to ₦6.27 trillion as
at the same date, partly due to the delist‐
ing of the nationalised banks4. The down‐
ward trend in the equity market is consis‐
tent with global trends, as investors seek
more guaranteed investment outlets. In
addition, upholding the MPR at a high 12%
translates to a negative outlook for the
equity market,
as
fund
managers
fly
to
safety in the face of a bearish stock mar‐
ket. The money market should continue to
benefit from this situation, particularly
given higher interest rates. Q3 saw the
issuance of two municipal bonds (Delta
and Niger) and three corporate bonds
(UBA, Lafarge Cement WAPCO and NA‐
HCO). We anticipate additional municipal
bonds issuance programs in Q1 2012. Our
outlook of the bond market is stable.
External Position
The domestic currency continued to be
pressured in the latter part of year. Data
from the CBN shows that the WDAS ex‐
change rate ranged between ₦150.25/US$
and ₦156.70/US$ from November to 12
December 2011, while the parallel market
rates ranged between ₦164.7/US$ and
₦160/US$ in the same period. In the face
of declining
oil
prices
and
the
change
in
the budgeted benchmark oil price to $70
per barrel5, the monetary policy commit‐
tee (MPC) had no choice but to devalue
the currency. The apex bank adjusted the
target official exchange rate from ₦150/
2
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US$ to ₦155.00/US$ and maintained the dollar exchange rates within +/‐ 3%. This implies that
the domestic currency will float between ₦150/US$ to ₦160/US$. Nigeria’s gross reserves
stood at $33.1 billion as at 8 December 2011, representing 4.3% accretion, from September
2011. The recent currency devaluation by the CBN should alleviate pressures on the foreign
exchange market. In addition we are of the view that the devaluation should reduce arbitrage
opportunities for currency speculators going forward.
Due to the financial crisis that has affected most European economies; the CBN has disclosed
plans to convert some of Nigeria’s foreign reserves from Euro to the Chinese Yuan. Although
this is expected to reduce the country’s exposure to the Euro, no further details as to the im‐
plementation of this strategy have been publicized.
Political Developments and Outlook
President Goodluck Jonathan presented the 2012 budget to the National Assembly on 13
December 2011. The budget largely focuses on macroeconomic stability, structural reforms
and investments in key sectors of the Nigerian economy. The budget proposal reflects govern‐
ment’s intention
to
ensure
fiscal
prudence
in
the
face
of
global
economic
uncertainties.
Recur
‐
rent expenditure was reduced to account for 72% of the 2012 budget, while capital expendi‐
ture allocation was increased to account for 28% (2011: 26%). We are of the view that the
increase in the share of capital expenditure may not adequately support the government’s
plan to increase infrastructural developments in the country by 2012. Unlike previous years,
the 2012 budget excludes petroleum subsidy allocation. This validates the planned removal of
fuel subsidy in 2012. Agusto & Co. is of the view that the implied action of the government
could bring the pump price of fuel to over ₦130 per litre, resulting in an increase in the gen‐
eral price level in the economy.
The People’s Democratic Party (PDP) gubernatorial candidate, Captain Idris Wada, emerged
winner of the Kogi state governorship elections in December 2011. Following the recently
concluded PDP primaries in Bayelsa and Sokoto states; Seriake Dickson and Aliyu Wamakko‐
the incumbent governor, have been declared winner of the party’s primaries of the respective
states. Politics is set to dominate a number of states – Adamawa, Bayelsa and Sokoto over the
next two quarters.
Heightened insecurity and political unrests in the northern parts of the country remain a con‐
cern to the nation. The Federal Government has increased funds allocated to security in the
2012 budget, in order to address these issues; In addition to fiscal prudence, and infrastruc‐
tural development, we also expect ensuring security of lives and property to be at the fore‐
front of the current governments agenda in 2012.
On the
basis
of
the
foregoing,
we
attach
a stable
outlook
to
the
Nigerian
economy.
3
1. National Bureau of Statistics 2011
Q3 GDP Report.
2. Inflation figures for the month of
November are yet to be published.
3. Average maximum lending rate
4. Spring
Bank
Plc
now
Enterprise
Bank
Limited , Bank PHB now Keystone
Bank Limited and Afribank Plc now
Mainstreet Bank Limited
5. The Minister of Finance reduced the
budgeted benchmarked oil price
from $75 to $70 per barrel.
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Maritime Security - Terror on the high seas The Maritime Industry in Nigeria is rela‐
tively well established; the Industry sup‐
ports trade and general commerce and is
crucial to the manufacturing, oil & gas and
agricultural sectors,
which
jointly
account
for a significant portion of the country’s
Gross Domestic Product (GDP). Nonethe‐
less, criminal maritime activities continue to
undermine the Industry’s profile. The num‐
ber of reported cases place Nigeria firmly
on the International Maritime Bureau’s
(IMB) hotspot list. According to IMB, mari‐
time attacks in Nigeria rank the second
highest in Africa, after Somalia. Over the
last five years, maritime attacks have been
on the
rise
and
have
shown
no
signs
of
dis
‐
sipating. An estimated 340 attacks have
been carried out in Nigeria since 2006. It is
imperative to note that these figures may
have been understated, actual numbers
may be twice as high, as many incidents,
mainly those involving fishing and oil ves‐
sels go unreported1. In addition, these num‐
bers do not include incidents that occurred
in domestic/inland waterways.
There are various maritime security threats;
terrorism, bunkering, armed robbery, kidnap‐
ping and assault. In Nigeria, maritime terror‐
ism has not been pronounced, particularly
since the Niger Delta Amnesty was signed in
June 2009. Most maritime attacks in Nigeria
are armed robberies and assaults. Oil and
chemical tanker vessels are the most tar‐
geted, presenting greater financial value.
Other targets include floating storages, off ‐
shore production platforms and service ves‐
sels. The attacks are often violent; pirates
usually rob vessels, kidnap crew/staff along
the coast, rivers, anchorages, ports and sur‐
rounding waters2. Generally all waters in
Nigeria are high risk; however the most sus‐
ceptible areas are Lagos and Bonny River.
Lagos is the most dangerous area3, account‐
ing for about 60% of the reported maritime
attacks in Nigeria.
Piracy and other illegal maritime activities
have cost the Nigerian economy a total of
about ₦31.6 trillion (US$202 million @
156.7/ US$) in the last three years4. Ships
coming into Nigeria’s territorial waters are
charged higher insurance premiums, because
of the risk involved, with far reaching infla‐
tionary and economic implications. In addi‐
tion, the Nigerian fishing industry, the third
highest contributor to the agricultural sec‐
tor’s GDP,
has
suffered
from
maritime
inse
‐
curities. Most domestic and international fish
trawlers are wary about patronizing Nigerian
waters as a result of the incessant pirate
attacks.
The Nigeria Maritime Administration and
Safety Agency (NIMASA) is the focal point for
consultation and policy direction on strategic
maritime security matters, while the Nigerian
4
‘Lagos is the
most dangerous
area, accounting
for about 60% of
the reported
maritime attacks
in Nigeria.’
Figure 1: Piracy Map of Africa for 2011
Source: IMB Piracy Reporting Centre
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Navy has the constitutional responsibility to secure Nigeria’s territorial waters. These
agencies have been fraught with various challenges which have restricted their ability
to effectively carry out assigned duties.
These include:
⇒ Paucity of funding and resources
⇒ The security agencies are ill equipped for combat
⇒ Dearth of adequate surveillance and intelligence gathering equipment to detect
and deter security threats relating to maritime security.
⇒ Restricted access to neighbouring territories limits the ability to arrest and inves‐
tigate marine incidents that have ventured into neighbouring waters.
Nigeria is heavily dependent on imports to sustain its economy. Currently, nearly 80%
of global
trade
is
transported
by
water.
Consequently,
it
is
imperative
that
internation
‐
ally recommended protective measures are urgently adopted to curb security inci‐
dents affecting marine vessels and port facilities. Nigeria’s maritime defence capabili‐
ties must be strengthened and regional cooperation between countries must take
centre stage. The constitution of a paramilitary maritime authority is just as impor‐
tant. In countries such as Indonesia, United Kingdom and Pakistan, coastal guards
support navy activities.
Plans are underway to establish an additional maritime security agency to comple‐
ment the activities of the Navy and provide further security for sea fearers. The Mari‐
time Security Bill is currently awaiting the approval of the senate. When approved, the
bill should
improve
the
security
profile
of
Nigeria’s
territorial
and
inland
water
ways.
It
is however important to note that effective implementation will require consistent
cooperation between all the maritime regulatory agencies.
5
1. ASI global Maritime Response – Quar ‐
terly Report
2. International Commercial Crime Ser ‐
vices
3. Bergen Risk Solutions
4. Nigeria Management Administration
and Safety Agency (NIMASA)
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The second half of 2011 has been fraught with arguments for or against the removal of
the subsidy on petroleum products as contained in the Federal Government’s 2012‐2015
Medium Term Expenditure Framework (MTEF). In 2011, the Federal Government (FG)
estimates the annual cost of subsidizing Premium Motor Spirit (PMS) and Dual Purpose
Kerosene (DPK) at ₦1.2 trillion. As a result of the subsidy, PMS retails at ₦65 per liter ‐
one of the lowest in the ECOWAS region. Since 2008, changes in fuel prices have not
moved in tandem with key indicators such as inflation, exchange rates and international
oil prices. Fuel prices and subsidy allocations have been set by the FG and are largely sub‐
ject to political manipulation. Despite the FG’s clamor that the fuel subsidy is unsustain‐
able, Nigeria’s expenditure on fuel subsidy as a percentage of GDP is still one of the low‐
est amongst energy subsidized countries.
On 1 December 2011, the clause for the fuel subsidy removal in the MTEF Bill was shelved
by the National Assembly. However, less than two weeks later on 13 December 2011, the
President excluded spending on the fuel subsidy from the 2012 budget. In view of the
clamor and recent happenings, it appears that the removal of the subsidy is inevitable.
Should the removal of the subsidy be effected, we believe the downstream Oil & Gas
industry would be affected in the following ways;
⇒
Currently,
consumption
of
fuel
is
exaggerated
on
account
of
the
subsidy.
PMS
con‐
sumption is estimated above 43 million liters per day, while kerosene consumption is
estimated above 9 million liters per day. We believe that once the subsidy is re‐
moved, price adjustment would lead to a reduction in fuel consumption, particularly
in the DPK market where people can switch to alternative cooking fuels. This could
lead to a reduction in Industry revenue, depending on the magnitude of the decline
in volume of products sold.
⇒ In an energy subsidized economy like Nigeria, the government has significant buyer
power, which allows it to dictate both the price at which PMS and DPK are sold as
well as the profit margins on such sales. Following the subsidy removal, the domestic
price of fuel will be set by market forces and thus fluctuate in line with international
oil prices and other macro‐economic variables. As a result, oil marketers’ profit mar‐
gins could become more volatile, exceeding the current government approved profit
margin during favorable periods and vice‐versa.
⇒ Consequently, the removal of the subsidy would foster the entry of new players,
ideas, technology and services in a more competitive market. Without price regula‐
tions, black marketers could switch to the formal market and contribute to the in‐
creased competition. Consequently, oil marketers are likely to struggle to retain mar‐
ket share. 6
Oil & Gas Downstream: In invisible hands
‘Nigeria’s expenditure on fuel subsidy as a percentage of GDP is still one of the
lowest amongst energy subsidized countries’
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⇒ Service quality and innovation is likely to improve, as marketers attempt to dif ‐
ferentiate themselves knowing that they can earn a premium for doing so. In
the PMS market for instance, some consumers may be willing to pay a higher
price for an express ‘fill‐up’ through a priority lane (as currently obtains illegally
during periods of scarcity). In the medium term, we anticipate the introduction
of additional
variants
of
fuels
such
as
leaded
and
unleaded
petrol,
which
would
provide opportunities for premium pricing and higher profit margins.
⇒ In May 2010, the FG initiated the issuance of Sovereign Debt Notes (SDN) – a
tradable debt instrument paid to oil marketers who do not receive fuel subsidy
funds within 45 days of importation. This initiative is intended to reduce the
cash conversion cycle of oil marketers and reduce the strain on their working
capital. The removal of the subsidy would ensure that oil marketers trade on a
cash basis in the open market, effectively shortening their cash conversion cy‐
cles to less than 45 days. In our opinion, this would improve the working capital
position of many oil marketing companies.
⇒ Under a subsidy regime, the oil marketers’ sales are guaranteed by the FG and
this offers comfort to creditors especially with the issuance of the SDN. Without
this guarantee, oil marketers may not have access to as favorable credit terms
or interest rates.
While the removal of the subsidy should increase the profit margins of some opera‐
tors, ultimately, it also increases the risk profile of the downstream oil & gas players.
In our opinion, the industry’s outlook with the subsidy removal would be character‐
ized by increased sensitivity to international oil prices, lower demand and continued
import dependence. Over the medium term, we anticipate entry of new players to
spearhead price correction and recovery in demand.
7
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Agricultural output in Nigeria remains low
relative to domestic consumption, partly
due to farmers’ insufficient capital and req‐
uisite
skills
for
acquiring
and
managing
modern technology. As a result, the Nige‐
rian Food & Beverage (F&B) Industry contin‐
ues to depend on importation. We estimate
that at least 40% to 50% of the Industry’s
inputs are imported from Europe, Asia and
the Americas. The Industry is, thus, nega‐
tively impacted by increases in international
commodity prices.
Over the last ten years, most F&B compa‐
nies have had to grapple with soaring inter‐
national food prices, due to shortfall in har‐
vests occasioned by extreme weather con‐
ditions in major exporting countries1. Prices
soared to
record
high
in
2008
owing
to
food
crisis. Following a mild recovery in 2009,
prices surged again in both 2010 and 2011
and are currently almost at 2008 levels.
Particularly, in November 2011, the price of
rice exports from Vietnam, the largest sup‐
plier of relatively cheap rice in the interna‐
tional commodity market, increased by 22%
to $467 from $380/tonne in January 20112.
Though the Nigerian F&B in‐
dustry’s profitability remains
satisfactory compared
to
other
industries in the manufactur‐
ing sector, we consider the
continuous rise in commodity
prices to be a major threat to
the Industry in the medium
term.
In dealing with the increasing global food
prices, governments of some exporting
countries have began to protect domestic
food production,
by
raising
tariffs
on
crop
export. Argentina, Russia, and China for
example have continued to raise tariffs on
crop export, thereby increasing costs for
importing countries such as Nigeria. Some
F&B companies have been able to hedge
against the price hikes through inventory
build‐up. However, in Agusto & Co’s opin‐
ion, this is not sustainable, given possible
strain on working capital and storage con‐
straints.
Despite the introduction of backward inte‐
gration policy by the Federal government in
2002, only a handful of F&B companies
have made efforts to cultivate agricultural
inputs. However, none has achieved the
70% self
‐sufficiency
intended
by
the
gov
‐
ernment. The Dangote Group owns about
6,330 hectares (HA) of land in Numan,
Adamawa State, which has the capacity of
producing between 316,500 and 443,100
tonnes of sugarcane annually. Flour Mills of
Nigeria Plc owns 15,000 HA of land in
Kaboji, Niger State that produces between
750,000 MT and 1 million MT of sugarcane
8
‘...at least 40% to 50% of the Industry’s inputs are imported from Europe, Asia
and the Americas’
Food & Beverage -
Price Trends ... A taste of things to come
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per annum. BUA Group’s 7,750 HA of land in Lafiagi, Kwara State has a capacity of produc‐
ing between 375, 000 MT and 500,000 MT of sugarcane annually. Cadbury Nigeria Plc via its
subsidiary – Stanmark Cocoa Processing Company Ltd ‐ owns about 300,000 HA of land in
Akure, Ondo State, which produces 69,822 MT of cocoa annually. For some of these com‐
panies, this is far below what is required annually.
The use of rudimentary technology in farm cultivation is a major impediment to backward
integration in the F&B Industry, as well as in the agricultural sector. The recent increase in
import duties on wheat and rice crops to 20% and 30% respectively in December 2011
should make F&B companies intensify their backward integration effort. In addition, local
farmers have begun to mark‐up local prices of agricultural commodities, in line with global
trends. According to the Central Bank of Nigeria (CBN), food inflation rose in the country to
9.7% in October 2011 from 8.7% in August 2011.
Continued shortfall in food supply is expected going forward due to climatic changes in
major exporting countries, increasing use of cereals for bio‐fuel production and the decline
in arable land for agriculture due to urbanization. We thus foresee a decline in F&B margins
going forward though the magnitude would vary across sub‐segments. F&B companies
operating in the breakfast cereals, dairy and soft drinks markets may not be able to fully
pass on increment in costs of raw materials, given the low purchasing power of the masses.
Therefore, in our opinion, sustained higher food prices in the international food market,
does not bode well for sales and profitability of the Nigerian Food & Beverage Industry,
without backward integration.
9
1. Drought in Russia; unfavorable weather
in the United States of America (US) and
Europe; and heavy rains/flood in Paki ‐
stan
2. Food and Agriculture Organization
(FAO) of the United Nations
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Despite the increasing number of private
hospitals in Nigeria and continued invest‐
ments by a number of them, Nigerians seek‐
ing foreign medical treatment (ranging from
routine checkups
to
lifesaving
surgeries)
is
still on the rise. In the past, this was more
common amongst the elite, top government
officials and politicians. However, today, this
group has expanded to include members of
the middle class, as well as a few in the lower
income bracket, who are sponsored for medi‐
cal treatment abroad by either philanthro‐
pists, non‐governmental organizations (NGO)
or federal and state governments. In a recent
key note address by the Minister of Finance,
Mrs. Okonjo
‐Iweala,
Nigerians
spend
about
₦30 billion ($200 million) annually on foreign
medical services. We believe this estimate is
quite conservative given that a good number
of people do not source foreign exchange for
such expenses from the official foreign ex‐
change market. Top destinations targeted by
Nigerians for medical treatment include
Egypt, United States of America, United King‐
dom, India, Germany and Saudi Arabia. Nige‐
rians are now reported to be the largest
medical tourists
to
India.
The increase in the number of Nigerians
seeking foreign medical treatment is due to a
loss of confidence in the Country’s health
care system. Nigeria has a life expectancy of
49 years, which is below African average of
52 years, as well as the global average of 66
years. Life expectancy is a major indicator of
a nation’s healthcare system. Nigeria’s low
expectancy is a pointer to the deplorable
state of the country’s health care system.
The Nigerian health system comprises both
public and private sectors, with about 10,000
hospitals, which are classified according to
the level of care they provide ‐ primary, sec‐
ondary and tertiary. Most hospitals focus on
primary healthcare, while provision of secon‐
dary and tertiary health care is lagging be‐
hind in both private and public hospitals.
Overall, the Nation’s health system is faced
with a myriad of challenges including:
⇒ Lack of access to adequate funding
⇒ Use of obsolete technology
⇒ Dearth of skilled medical professionals
due to poor welfare package and work‐
ing condition
⇒ Inadequate facilities
⇒ Poor record keeping
⇒ High operating costs on account of poor
infrastructure including inadequate
power supply, bad roads.
As a result, there is decay in the health sys‐
tem. Unlike many countries focusing on im‐
proving their health system by investing in
10
‘...the Country
spends about
₦ 30 billion ( $200
million ) annually
on foreign medi ‐
cal services’
Medical Tourism - On the rise
Table 1: Top Destinations for Medical Treatments by Nigerians
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research, training of medical personnel and investments in modern technology, the Na‐
tion’s system is bereft of such progress and is believed to be one of the sectors that has
received little attention from the Government. Over the last 5 years (2007‐2011), an
average of 5% of the Country’s budget has been allocated to health sector, which is be‐
low the targeted 15% declared in the African Union’s meeting of 2001 in Abuja. In addi‐
tion,
the
recent
scorecard
released
by
the
World
Health
Organization
revealed
that
Nige‐
ria is among the 38 countries that are off ‐track in meeting the health related United Na‐
tion’s‐set Millennium Development goals (MDG’s) by 2015. Based on the recent 2012
budget proposal presented by President Goodluck Jonathan, the allocation to health
sector is 6%, which is still considered low.
Although the Federal Government has plans to revive the health sector as based in its
2011‐2015 medium term framework, the pace of implementation is slow and yet to
impact positively on the sector. The deplorable state of the public hospitals has led to
preference for private hospitals by many Nigerians. Some private hospitals are capable of
treating some of the more complex medical cases. However, many Nigerians prefer for‐
eign medical care, which provide better pre and post medical care than what is obtain‐
able locally. Nevertheless, we believe that the private medical service sector is in the
best position to contribute to the development and revival of the Nigerian healthcare
system. The sub‐sector can be strategically positioned to fill the inherent healthcare gap
caused by the poor state of the public healthcare system.
In the absence of further development of private medical services, we believe that the
country will continue to be faced with dearth of skilled medical professionals as Nigerian
healthcare workers continue to migrate to other countries and expect the performance
of the Nation’s health sector to remain subdued. Consequently, the number of Nigerians
seeking foreign medical treatments will continue to increase.
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Agusto & Co. Limited
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