Thought Leadership

Tackling the Budget Utilisation Challenges in the Nigerian Health Sector

3 Mins read

The Nigerian health sector is severely underfunded. Each budget year, the majority of health advocates lament the federal government’s inability to meet the Abuja Declaration’s target of allocating at least 15% of the country’s budget to the health sector. Although Nigeria has experienced a significant increase in funding allocation in the quest to improve the healthcare sector, the path to sustainable health financing remains an ongoing journey.

The Ministry of Finance and Ministry of Budget and Economic Planning, Departments, and Agencies (MDAs) argue that despite the gradual increase in budget allocation, including the implementation of the Basic Health Care Provision Fund (BHCPF) and commitments to immunisation funding, significant obstacles still prevent more funding for the health sector. These challenges include low government revenue, restricted fiscal space for additional expenditure, and the primary concern about the underutilisation of allocated funding.

Image credit: Nigeria Health Watch

Is it a problem of utilisation?
Health budget execution extends beyond allocation and release. It is also critical that the budget released is efficiently and accountably utilised. Currently, the Nigerian health sector has one of the lowest capital budget execution rates at the Federal level. According to data from the Office of the Accountant General of the Federation and Budget Office of the Federation, the capital allocation for the Federal Ministry of Health and Social Welfare (FMoHSW) has increased by 139.78% , from N86.49 billion in 2018 to N207.40 billion in 2022.

Image credit: Nigeria Health Watch

However, the percentage of released capital used has decreased over the same time period, from 96.76% in 2018 to 60.84% in 2021, and further down to 47.74% as of Q3 2022. This underutilisation of funds results in money being returned to the federation account at the end of each fiscal year, reinforcing the claim that the health sector does not require the increased resources that it continues to advocate for.

During a Budget Office Health Stakeholder Workshop on Enhancing Health Sector Budgeting in May 2023, stakeholders identified a range of factors impacting budget utilisation. One of the issues identified was the delay in the release of funds from the Federal Ministry of Finance, Budget and National Planning which hampers the FMoHSW’s ability to execute its budget effectively. This is compounded by a perceived lack of absorptive capacity, leading to low-budget execution and the return of unspent funds. When funds are released late in the fiscal year, the FMoHSW has limited time to spend its budget before having to return the funds to the federation account.

Over-dependence on donor and partner funds for programme activities further complicates the issues. This reliance is coupled with delays in procurement planning as stipulated by the Procurement Act, which can slow down the implementation of critical health programmes. Another challenge is misalignment. Sometimes, plans do not align with the budget, resulting in appropriated funds being returned to the federation account.
 
Addressing the root causes
Historically, there has been a disconnect within the FMoHSW between the Department of Health Planning Research and Statistics (DHPRS), which develops policies, and the Finance and Accounts Department (DFA), which oversees the budget development process. This disconnect has hindered the DHPRS’s input in the health budgeting process. To address this, the Planning and Budget Committee (P&B Committee) was approved at the 62nd National Council on Health (NCH) meeting. The committee, co-chaired by the Director of DHPRS and DFA, has clearly defined Terms of Reference (ToR) to encourage collaboration between DHPRS and DFA in managing the FMoHSW budget process.

Image credit: Nigeria Health Watch

The Nigeria Health Sector Renewal Investment Initiative, and the first Sector-wide Approach (SWAp) in Nigeria’s health sector, launched by the Coordinating Minister for Health and Social Welfare, Professor Muhammad Ali Pate, aims to enhance the efficiency and alignment of spending with strategic priorities. This is crucial as demands for increased funding for the health sector is being hindered by inefficiencies, particularly in budget utilisation.

The development of a unified approach and framework for a national health system, which can channel both public and donor resources, is expected to ensure sufficient resources, enhance coordination, and reduce inefficiencies. However, this necessitates the strengthening of governance and the implementation of effective public financial management and accountability mechanisms.

Addressing these challenges is essential to encourage increased allocation, which should significantly improve health outcomes. As health advocates, we anticipate the outcome of the strategic vision and SWAp in ensuring more efficient resource management in the health sector.

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