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The Danger of Relying on External financing to Fund Health Projects

By Bolaji Samson Aregbeshola
on February 20, 2018

Initially launched in October 2012 by the administration of former President Goodluck Ebele Jonathan, the Federal Ministry of Health (FMOH) in June 2016 under the administration of President Muhammadu Buhari re-launched the Save One Million Lives (SOML) project. It was to focus on increasing the use of high impact reproductive, child health and nutrition interventions; improving the quality of maternal and child health services; strengthening monitoring and evaluation systems and measurement data; encouraging private sector innovations; and increasing transparency in management and budgeting for primary health care (PHC) in Nigeria. The initiative was given approval for a US$500 million International Development Association credit by the World Bank.

This blog post argues against a reliance on external funding for health projects, and suggests that while it is an important resource for financing in the Nigerian health care system, domestic resources must be prioritised and increased in the long-term.

Past experience of similar initiatives; the Pre-paid Health Scheme Pilot and Second Health System Development (HSDP II) for example, have demonstrated the danger of throwing money at public health challenges, particularly through additional finance sourced from financial organizations such as the World Bank. These interventions have not translated into better functionality of PHC facilities and improved health outcomes, because many states have over the years misused funds from such projects.

Yet, Nigeria continues to make annual repayments on these debts, with nothing substantial to show for it. The World Bank confirms that Nigeria has made limited progress in improving its health indices over the years, despite securing about 28 credit approvals, amounting to billions of dollars on different projects for the health sector from the World Bank in over two and half decades.

Even more troubling, is the news from the recently published report on SMOL which revealed that many states had performed poorly. This raises the question of whether the initiative is capable of removing barriers to health care services, and providing protection against the financial burden and impoverishment that results from seeking care. Of particular concern are vulnerable people such as pregnant women and children, who are facing financial barriers to accessing PHC services, which  could explain the poor performance recorded on the SOML indicators of maternal, new-born and child health. Some of the roadblocks to the success of the initiative have been a lack of political will, poor governance, poor financial management, and a lack of transparency and accountability.

Using loans to fund health projects shows a lack of political will on the part of governments to increase public spending on health and invest in health of the people. For instance, the PHC system in Nigeria has been bedevilled by poor budgetary allocation; it is estimated that the Federal Government budget decreased from 8.4% of total spending in the health sector in 2012 to 4.7% in 2015. It also, crucially, sometimes, shows an inability to successfully generate tax revenue, as is the case in Nigeria where in spite of the potential of using taxes to fund the health system, successive governments have not been able to improve total tax revenue as a percentage of Gross Domestic Product (GDP) beyond the current 1.6%.

In order to resolve this fundamental issue the government should increase the tax base. It should also improve efficiency in the use of resources and employ external aid in a prudent manner.

Increasing public spending and investing in health is vital for economic development, however, the financial sustainability of health systems can only be guaranteed when future funding is not constrained by huge debts from loans.

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