Kenya and Nigeria's Journey in Healthcare Financing and Achieving Universal Health Coverage in Africa
Healthcare financing plays a crucial role in advancing Universal Health Coverage (UHC) by offering financial risk protection to individuals and shielding them from the financial hardships associated with healthcare costs. In many low—and middle-income countries, reliance on out-of-pocket payments often results in catastrophic health expenditures, pushing families into poverty.
Establishing effective mechanisms such as national health insurance programmes or targeted subsidies can help eliminate financial barriers, ensuring that people can access care without fear of economic ruin. Kenya and Nigeria represent two major economies in Africa with significant healthcare markets, making them compelling case studies in the journey toward UHC. Both countries have undergone significant healthcare financing reforms, yet continue to grapple with high out-of-pocket expenditures, low insurance coverage, and funding shortfalls. Their contrasting approaches, shared challenges, and emerging opportunities offer valuable lessons for other low- and middle-income countries striving to achieve equitable and sustainable healthcare financing.
Kenya’s Healthcare Financing: Progress, challenges and the path to achieving UHC
In Kenya, a mixed financing model supports the healthcare system, drawing funds from various sources, including government revenue from taxes, donor contributions, health insurance schemes, private insurance, and direct out-of-pocket payments. While the government funds approximately one-third of total healthcare costs, the remaining burden falls on private insurers and individual payments, often straining households.
In the 2023/2024 financial year, the Ministry of Health received only 11% of the national budget—well below the 15% commitment outlined in the 2001 Abuja Declaration and falling short of the recommended 5% of GDP for health expenditure. This underfunding has resulted in high out-of-pocket healthcare costs, limiting access to essential services for many Kenyans.
In October 2023, Kenya undertook a major reform of its healthcare financing system, replacing the National Health Insurance Fund (NHIF) with a new framework under the Social Health Insurance Act 2023.
This legislation introduced three distinct funds, each designed to enhance healthcare accessibility and affordability:
- Social Health Insurance Fund (SHIF) – Covers services provided in contracted Level 4, 5, and 6 healthcare facilities. Employees in the formal sector contribute 2.75% of their income, while informal sector workers contribute based on their financial capacity.
- Primary Healthcare Fund – Finances services in Level 2 and 3 facilities, ensuring access to basic healthcare at no direct cost to Kenyans. This fund is fully financed by the government.
- Emergency, Chronic, and Critical Illness Fund – Supports emergency treatments and the management of chronic illnesses after SHIF coverage is exhausted. This fund is also fully financed by the government.
While these reforms are a step toward strengthening healthcare access, Kenya’s healthcare system still faces significant hurdles which include:
- Fragmented coordination between public and private healthcare providers.
- Limited data sharing across health institutions, affecting service efficiency. • Financial constraints, with health sector funding still below international recommendations.
- Supply chain inefficiencies, leading to shortages of essential medicines and medical supplies.
- Implementation setbacks in rolling out the Social Health Insurance Act, particularly in ensuring smooth contributions and access to services.
Nigeria’s recent strides towards achieving UHC
Nigeria also operates a mixed health financing system with out-of-pocket expenditure on health accounting for more than 70% and federal government spending about 12%. Federal budget allocation to health hovers between 3.5% and 6.2%, falling far below the Abuja Declaration target of 15%. Public health spending as a share of Gross Domestic Product (GDP) was as low as 0.65%, far below the 4% to 5% recommended for UHC.
Nigeria has also undergone some significant changes in health financing legislation in recent years. In May 2022, the National Health Insurance Authority (NHIA) Act was signed into law, the first enabling legislation for mandatory health insurance in the country. Prior to this, health insurance coverage had hovered below 5% since the operationalisation of the National Health Insurance Scheme (NHIS) in 2005, mostly covering the formal sector.
Nigeria’s high out-of-pocket expenditure rates put a significant proportion of the population at risk of catastrophic or impoverishing health expenditure, particularly in the context of rising inflation and cost of living.
The law also instituted a Vulnerable Group Fund aimed at providing coverage for the poor and vulnerable who are unable to pay premiums, operationalised primarily through the preceding Basic Health Care Provision Fund (BHCPF). The BHCPF, instituted by the 2014 National Health Act, leverages 1% of the federal consolidated revenue to provide access to quality primary healthcare for the poor and vulnerable. It was rolled out in 2019.
With an enabling law and new leadership at the NHIA, the target is to enrol 44 million Nigerians by 2030. The current coverage is estimated at 19.1 million Nigerians, with 2 million indigents enrolled under BHCPF. The NHIA has over 50% of this target left to cover in about 5 years, and meeting this target will amount to about 20% of the Nigerian population covered.
This is a long way from UHC, but still significant progress compared to what has been achieved in 30 years since the operationalisation of the NHIS.
Challenges with scaling up UHC in Nigeria
Challenges with healthcare financing in Nigeria are not dissimilar to those in Kenya and include inefficiencies in the healthcare system, limited institutional capacity, corruption, an unstable economy, limited fiscal space, and a lack of political will. Financial risk protection mechanisms have largely been unable to tap into the missing middle, the informal sector from whom the collection of premiums is not straightforward due to a lack of structure, but can afford to pay premiums and, thus, are not included in the vulnerable groups.
Specific challenges with scaling UHC include a flailing healthcare system with poor infrastructure, inadequate human resources, and weak referral systems, which affect public trust and lead to poor health insurance enrolment rates. The lack of an integrated, interoperable data management system makes driving/tracking health insurance enrolments, coverage and quality of care across public and private sector health insurance and health service providers particularly difficult. Low public awareness and poor perception of health insurance is another critical challenge to surmount, particularly in enforcing mandatory health insurance in the informal sector.
The role of the private sector
The private sector plays a crucial role in bridging the healthcare gap, contributing nearly 50% of all healthcare services in Kenya and up to 70% in Nigeria. One of its key contributions is mobilising additional financial resources. Private health insurance schemes help reduce out-of-pocket expenses, providing financial protection for individuals and families. PublicPrivate Partnerships (PPPs) enable governments to collaborate with private entities to fund healthcare infrastructure, medical equipment, and service delivery. Additionally, foreign direct investment (FDI) from multinational corporations and impact investors injects muchneeded capital into the healthcare sector, supporting innovation and expansion.
Beyond financing, the private sector is instrumental in expanding access to healthcare services. Private hospitals and clinics often fill critical gaps in public healthcare systems, ensuring that more people receive timely medical attention. The rise of telemedicine and digital health solutions, driven by private-sector innovation, has further improved healthcare accessibility, particularly in remote and underserved areas.
Efficiency and innovation are also at the core of the private sector’s contributions. Pharmaceutical companies invest in drug production and distribution, improving access to essential medicines. Health technology firms leverage artificial intelligence, big data, and digital platforms to enhance diagnostics, treatment, and health financing. These innovations help streamline service delivery, reduce costs, and improve patient outcomes, ultimately supporting the broader UHC agenda.
The path forward
Lessons can be shared from Kenya by significantly increasing government spending on health to improve outcomes. Other priority actions include:
- Enforcing mandatory health insurance and implementing innovative approaches to build trust and drive enrolment of the informal sector
- Establishing effective data management systems for enrolment, quality assurance, strategic purchasing, financial management, and reporting
- Scaling up coverage of poor and vulnerable groups through mechanisms like the CEmOC and MAMII, in line with the government’s current drive to reduce maternal mortality
- Improving the quality of care in healthcare facilities by addressing wider systemic issues like infrastructural gaps, supply chain inefficiencies, inadequate human resources for health, etc.
Addressing these challenges is crucial for Kenya to achieve equitable, sustainable, and highquality healthcare for all its citizens. With strong political will and effective implementation, the country can make significant strides toward a more inclusive and resilient healthcare system. Nigeria should leverage public-private partnerships, to strengthen public-private integration to drive technological innovations in bridging the gaps in data management and employ a whole-of-society approach to improving public awareness and trust, towards driving enrolment and coverage rates.
