Nigeria’s healthcare sector offers a growing opportunity for investors, whether local and foreign, medical and non-medical alike. There is a persistent need for private solutions in the areas of medical, diagnostic, pharmaceutical, and wellness services due to the country's population of over 200 million people and ongoing underinvestment in public health facilities. However, properly navigating the regulatory environment is crucial to the success of investments. With an emphasis on Lagos State and the Federal Capital Territory (FCT), this article provides a comprehensive reference on opening a healthcare facility in Nigeria.
1. Eligibility for Investment in Nigeria's Healthcare Sector
Ownership of healthcare facilities is not exclusively reserved for medical professionals. Any individual or corporate entity, whether Nigerian or foreign, may invest in hospitals, pharmacies, diagnostic laboratories, and analogous establishments. However, it is imperative to note that the provision of clinical or pharmaceutical services within such facilities is strictly limited to duly licensed professionals. Investors are at liberty to retain economic control of the business, provided that the actual conduct of health services within the facility adheres strictly to professional regulatory standards.
Foreign investors must undertake the following mandatory registrations and compliance measures:
Registration of the corporate entity with the Corporate Affairs Commission (CAC).
Obtainment of a Business Permit.
Engagement with the Nigerian Investment Promotion Commission (NIPC) for regulatory clearance and access to available investment incentives.
Compliance with the provisions of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.
Obtainment of Expatriate Quota approvals where applicable.
2. Strategic Focus Area and Regulatory Determination
The initial step involves delineating the specific nature of the proposed healthcare enterprise. This foundational decision is critical, as it directly influences the relevant regulatory bodies to be engaged, the permissible naming conventions for the entity, and the requisite licensing conditions.
Medical Practice (Hospitals and Clinics)
Regulators: Medical and Dental Council of Nigeria (MDCN) concurrently with the Private Health Establishments Registration and Monitoring Committee (PHERMC) for the FCT, or the Health Facilities Monitoring and Accreditation Agency (HEFAMAA) for Lagos State.
Note: The corporate structure must include a minimum of three (3) directors, one of whom must be a duly licensed medical practitioner.
Optometry
Regulators: Optometrists and Dispensing Opticians Registration Board of Nigeria (ODORBN), in conjunction with PHERMC (FCT) or HEFAMAA (Lagos).
Note: Proscribed words in company names include, but are not limited to, "consult," "centre," or "specialist."
Pharmacy
Regulators: Regulators: Pharmacy Council of Nigeria (PCN) and the National Agency for Food and Drug Administration and Control (NAFDAC).
Note: Ownership of retail pharmacies is generally restricted to licensed pharmacists, with limited exceptions under Section 27(3) of the PCN Act. Non-pharmacists may only hold ownership interests in hospital pharmacies or wholesale/chain pharmacies under stringent conditions.
Diagnostics:
Regulators: Medical Laboratory Science Council of Nigeria (MLSCN), with a degree of oversight from NAFDAC.
Note: Clinical directors within diagnostic facilities must be qualified medical laboratory scientists.
3. Legal Structure and Business FormationInvestors may elect between two primary legal structures:
Business Name: A simpler structure, generally appropriate for sole practitioners.
Private Company Limited by Shares (Ltd): this is the optimal structure for scalability, capital raising, or the allocation of equity interests.
Healthcare investors seeking external financing, such as bank loans, private equity funding, or engaging in joint ventures, are strongly advised to register a Private Company Limited by Shares. This structure facilitates a clear delineation between land ownership, operational activities, and equity interests. It also helps in asset isolation in the event of inability to discharge loan obligations. Furthermore, the company must obtain a Tax Identification Number (TIN) and register with the Federal Inland Revenue Service (FIRS) for tax compliance.
Compliance Tip: Facilities offering both clinical services and pharmaceutical operations are mandated to maintain strict operational separation. This includes, but is not limited to, distinct entryways, separate accounting systems, independent staff rosters, and individualized documentation, all in adherence to PCN and HEFAMAA/PHERMC guidelines.
4. Registration and Licensing Protocol
For hospitals in the FCT or Lagos, the standard regulatory roadmap encompasses the following stages:
Company Registration: Register the corporate entity with the Corporate Affairs Commission (CAC).
Premises Acquisition: Secure suitable premises with requisite zoning clearance.
Application Submission: Submit a formal application to PHERMC (FCT) or HEFAMAA (Lagos), inclusive of site drawings, details of the board composition, and credentials of key staff.
Facility Inspection: Undergo a rigorous pre-licensing inspection covering aspects such as spacing, hygiene protocols, waste disposal mechanisms, and adherence to facility distancing requirements.
Operational Licence Issuance: Obtain the requisite operational licence, a process typically spanning three (3) to six (6) months, contingent upon full compliance.
spanning three (3) to six (6) months, contingent upon full compliance.
Additional Note: Facilities intending to offer imaging or radiology services must secure a safety clearance from the Nigerian Nuclear Regulatory Authority (NNRA).
For pharmacies, the PCN is responsible for issuing retail, hospital, or wholesale licences. As previously stated, retail pharmacy ownership is generally restricted to pharmacists or their immediate relatives (sharing the same surname). Section 27(3) of the PCN Act provides an exception, permitting non-pharmacists to invest in chain pharmacies (a minimum of 10 outlets), provided that a Nigerian pharmacist holds at least a 40% equity stake and occupies a position on the board of directors.
5. Premises Requirements and Zoning Regulations
Healthcare premises must satisfy specific structural and locational standards:
FCT: A facility must be situated at least 400 meters from a similar establishment, a regulation stringently enforced by PHERMC.
Lagos: Spacing requirements are evaluated on a case-by-case basis by HEFAMAA.
All facilities must possess accessible entry points, a reliable water supply, efficient waste disposal systems, adequate emergency exits, and proper ventilation.
Facility signage and internal layouts are subject to pre-approval by the relevant regulatory bodies.
6. Human Resources and Operational Framework
Prior to the issuance of an operational licence, the engagement of certain mandatory personnel is required:
Medical Director: Duly licensed by the Medical and Dental Council of Nigeria (MDCN).
Chief Pharmacist: Licensed by the Pharmacy Council of Nigeria (PCN).
Registered Nurses and Midwives.
Qualified Laboratory Scientists: Mandatory for diagnostic service providers.
All medical staff must possess valid annual licences and maintain current registration with their respective professional bodies. Employment contracts should meticulously delineate duties, liabilities, and obligations pertaining to regulatory compliance. Each facility is advised to maintain a comprehensive licence schedule and diligently track Continuous Professional Development (CPD) compliance to ensure readiness for regulatory inspections.
Operational challenges, particularly for 24-hour centres, frequently include issues related to shift scheduling, power supply reliability, and security. Investors commonly mitigate these challenges through the deployment of solar power backups, engagement of third-party security providers, and implementation of staggered shifts.
7. Taxation, Incentives, and Financing Mechanisms
Pioneer Status: May be granted by the NIPC, potentially conferring up to five (5) years of corporate income tax exemption.
Value Added Tax (VAT): Healthcare services are zero-rated under the provisions of the VAT Act. However, imports of medical equipment may be subject to VAT or customs duties unless specific exemptions apply.
Financing Options: Available avenues include the Bank of Industry (BOI), the African Development Bank (AfDB), and various private equity funds.
Public-Private Partnership (PPP) Opportunities: Federal and State Governments are increasingly seeking private sector collaboration for the provision of diagnostic, surgical, and primary care services.
Foreign Exchange (FX) Advisory: Healthcare investors injecting foreign capital must obtain an electronic Certificate of Capital Importation (eCCI) from an authorized dealer bank. This document is crucial for ensuring the legal protection of profit repatriation and dividend transfers. For the importation of medical equipment, investors must adhere to the NAFDAC Guidelines on the Importation of Medical Devices, which necessitate prior listing, comprehensive documentation, and, in certain instances, local representation. Additional documentation, including the pro forma invoice, NAFDAC clearance, and Form M, must be submitted to the Nigeria Customs Service. Advance planning and proactive regulatory engagement are essential to avert clearance delays, valuation discrepancies, or foreign exchange bottlenecks.
8. Risk Management, Regulatory Compliance, and Data Governance
Common risks inherent in the sector include:
Utilization of unlicensed staff or operation of unregistered facilities.
Improper facility segmentation (e.g., co-location of clinics and pharmacies without operational separation).
Exposure to medical malpractice claims.
Violations of data privacy regulations.
Nigeria's Data Protection Act (NDPA) mandates informed consent, secure data storage protocols, and prompt reporting of data breaches. Facilities must implement comprehensive compliance manuals, conduct periodic internal audits, and proactively engage legal counsel to mitigate these risks.
9. Expansion Strategies, Exit Mechanisms, and Conversion Opportunities
Healthcare facilities can pursue growth through various strategies, including franchising, replication of successful models, or engaging in joint ventures. Viable exit strategies may encompass strategic sale, merger, or public listing. Shareholder agreements should be meticulously drafted to include clear exit clauses and buy-sell provisions.
Distressed assets, such as underperforming hospitals, offer acquisition opportunities for repositioning, subject to thorough regulatory and operational due diligence. Existing residential or commercial structures can be converted into clinics, provided that the necessary change-of-use approvals are secured from the relevant urban planning authorities.
Prepared by Chinedu Albert
For: The Firma Advisory