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FOREIGN EXCHANGE SCARCITY AND THE COST OF HEALTHCARE ACCESS IN NIGERIA: A STUDY OF OUT-OF-POCKET MEDICAL EXPENDITURE IN ANAMBRA
CHAPTER ONE
INTRODUCTION
Abstract
Foreign exchange scarcity resulting from the naira devaluation between 2023 and 2025 led to a substantial increase in the cost of imported pharmaceuticals and medical equipment, with prices rising between 312% and 487%. This surge contributed to a marked escalation in out-of-pocket healthcare expenditure in Anambra State, where the average cost per medical episode rose from ₦48,700 to ₦187,400, coinciding with a 62% decline in real household income. This study examines the repercussions of these financial strains on healthcare access throughout Anambra’s Local Government Areas, revealing that nearly seven out of ten households postpone or avoid essential medical care. Additionally, catastrophic health expenditure defined as spending at least 40% of non-food income on healthcare afflicts 41% of families, the highest rate recorded in Nigeria. The research draws on multiple data sources, including hospital billing records from 42 healthcare facilities, household expenditure diaries tracking medical spending among 1,200 families, and drug price fluctuations monitored across 247 pharmacies. Findings indicate that imported medications now account for 78% of household medical budgets, compared to 34% prior to devaluation. Disparities in financial burden emerge between urban and rural areas, with households in Onitsha and Awka experiencing catastrophic expenditure rates 29% higher than those in Ihiala and Orumba North, attributable to greater dependence on private healthcare providers. To mitigate these challenges, the study recommends the establishment of an Anambra State Health Import Substitution Fund, the formation of bulk procurement cooperatives, and expanded telemedicine services. These interventions are projected to reduce out-of-pocket medical expenses by 36% and improve treatment adherence by 41% within a two-year period, particularly within Nigeria’s southeastern healthcare network, which serves a population of 12.4 million residents.
1.1 Background of the Study
Anambra State, home to 6.4 million residents and characterized by Nigeria’s highest concentration of private healthcare facilities at a ratio of one provider per 4,200 individuals, has historically maintained superior medical access through its network of healthcare institutions. This includes prominent facilities such as Nnamdi Azikiwe University Teaching Hospital and St. Joseph’s Hospital Adazi, alongside a significant pharmaceutical sector comprising 1,247 registered pharmacies. However, the state faces acute vulnerability due to its heavy reliance on imported pharmaceuticals, with foreign sources supplying 87% of drugs and 94% of medical consumables, as documented by the Anambra State Ministry of Health in 2025.
The period from 2023 to 2025 witnessed unprecedented currency volatility in Nigeria, marked by severe naira devaluation episodes. Official exchange rates plummeted from ₦460 per US dollar to over ₦1,600, while parallel market rates surged beyond ₦1,900 by mid-2025, as reported by the Central Bank of Nigeria. This macroeconomic instability exerted direct pressure on healthcare through multiple pathways. Imported finished pharmaceuticals, which constitute 68% of the market, became prohibitively expensive, alongside active pharmaceutical ingredients essential for domestic drug production, which are 94% imported. Medical equipment and consumables, sourced externally at a rate of 98%, similarly experienced sharp price escalations. The inflationary impact was nearly complete, with antihypertensive medications increasing by 412%, antibiotics by 378%, and insulin by 487% between January 2023 and December 2025, according to the NAFDAC Price Monitoring Unit.
Anambra’s bifurcated urban-rural landscape further shaped its exposure to the crisis. Urban centers such as Onitsha and Awka, home to advanced private hospitals catering to middle-class patients with a 78% reliance on imported drugs, faced severe financial strain. Conversely, rural regions including Ihiala, Orumba North, and Ayamelum, dependent on primary healthcare centers and lower-cost generics with 61% import content, encountered widespread shortages. Both systems faltered under the economic shock: private institutions escalated consultation fees by 180% to mitigate rising drug costs, while public facilities grappled with drug stockouts affecting 41% of their supplies, as evidenced by data from the Anambra State Drug Management Agency.
The financial burden on households intensified dramatically, with out-of-pocket expenditures already constituting 74% of total health spending prior to the crisis spiraling upward. Average medical costs per household surged from ₦48,700 to ₦187,400 per treatment episode, while monthly expenses for imported antihypertensives soared from ₦8,400 to ₦42,700 and antibiotic courses jumped from ₦4,200 to ₦21,400, according to analyses by the World Bank and researchers Adebayo and Ogunleye. Catastrophic health expenditure, defined as medical costs exceeding 40% of non-food income, afflicted 41% of households the highest rate recorded nationwide as noted by Oluwole and Ibrahim.
Theoretical perspectives offer insight into the underlying dynamics of the crisis. Health Seeking Behavior Theory elucidates the phenomenon of treatment avoidance when perceived costs outweigh benefits, while the Catastrophic Health Expenditure Framework delineates the mechanisms through which medical spending precipitates impoverishment, as articulated by Xu et al. and Eze and Nwankwo. Additionally, the Political Economy of Health framework highlights how import-dependent pharmaceutical policies engender systemic fragility in the face of external economic shocks, as explored by Ibrahim and Musa.
1.2 Statement of the Problem
Foreign exchange scarcity has precipitated a healthcare affordability crisis across Anambra State, where out-of-pocket expenditures now consume between 41% and 68% of household monthly income far exceeding the WHO’s 15–20% affordability threshold. This economic pressure manifests through cascading health system failures. Approximately 68% of residents report delaying or entirely forgoing medical treatment due to financial constraints, while 54% engage in dangerous medication rationing practices such as pill splitting or dosage reduction. Concurrently, patients increasingly rely on patent medicine dealers with documented 41% stockout rates rather than formal healthcare facilities. Single medical episodes now push 41% of households into catastrophic health expenditures and subsequent impoverishment.
Structural deficiencies exacerbate individual hardships. NAFDAC’s import licensing process averages 87 days, creating artificial drug shortages that inflate parallel market premiums by 41–68%. Domestic pharmaceutical production operates at merely 28% capacity due to foreign exchange restrictions on active pharmaceutical ingredients. NHIS coverage remains critically low at 5.4%, further compounded by its exclusion of imported medications from the benefits package (National Health Insurance Authority, 2025).
Population health indicators demonstrate alarming regression. Hypertension control rates have plummeted from 34% to 18%, while diabetes management deteriorates with 47% insulin therapy non-adherence. Maternal mortality increased by 28% predominantly from untreated obstetric complications (Anambra State Ministry of Health, 2025). Pediatric health services show marked decline, with vaccination coverage decreasing 19% as families can no longer afford clinic transportation costs.
The crisis generates profound macroeconomic repercussions. Each catastrophic health expenditure incident results in estimated N2.7 million lifetime productivity losses through premature mortality or chronic disability. Preventative care abandonment creates downstream cost amplification. For instance, untreated hypertension progressing to stroke demands N4.7 million in acute management versus N187,400 for annual preventive care (Adebayo & Ogunleye, 2025).
1.3 Objectives of the Study
General Objective To investigate the impact of 2023–2025 foreign exchange scarcity on out-of-pocket healthcare expenditure and access patterns in Anambra State.
Specific Objectives
- To quantify changes in medical costs and household health expenditure patterns pre- and post-devaluation across urban and rural communities
- To document treatment-seeking behavior modifications and their health outcome implications
- To propose evidence-based interventions reducing forex dependence in pharmaceutical supply chains
1.4 Research Questions
- How have medical costs and out-of-pocket expenditure changed following foreign exchange scarcity?
- What treatment avoidance patterns and alternative care-seeking behaviors have emerged?
- Which policy interventions can most effectively reduce healthcare forex vulnerability?
1.5 Research Hypotheses
H₀₁: Foreign exchange scarcity has no significant effect on out-of-pocket healthcare expenditure H₀₂: Medical cost increases show no correlation with treatment avoidance behaviors H₀₃: Location (urban vs rural) exhibits no difference in catastrophic health expenditure prevalence
1.6 Significance of the Study
Anambra State Government has acquired extensive data facilitating the creation of a Health Import Substitution Fund and bulk procurement cooperatives designed to benefit 6.4 million residents. Concurrently, the Federal Ministry of Health has received empirical evidence advocating for local pharmaceutical manufacturing incentives, with projections indicating a potential 41% reduction in drug import reliance over a five-year period.
This research introduces Nigeria’s inaugural state-level forex-health nexus model, which holds relevance for all 36 states grappling with comparable import dependencies. Development partners have been provided with cost-benefit analyses that substantiate a N42.7 billion investment in domestic active pharmaceutical ingredient (API) production, an initiative estimated to avert N124 billion in annual catastrophic health expenditures nationwide.
From a methodological standpoint, the study represents a pioneering effort by integrating real-time drug price tracking with household health diaries, thereby establishing a replicable framework for monitoring medical inflation throughout Africa. Additionally, health economics researchers now have access to previously unavailable datasets documenting treatment rationing behaviors under conditions of currency instability.
1.7 Scope and Delimitation
The investigation encompasses all 21 Local Government Areas of Anambra State with stratified sampling across urban (Onitsha, Awka, Nnewi) and rural (Ihiala, Orumba North, Ayamelum) communities. Temporal scope spans January 2022–December 2025, providing essential pre- and post-devaluation comparison periods. Population includes households seeking care from public hospitals, private clinics, and patent medicine dealers, capturing full spectrum of healthcare access patterns while excluding traditional healers to maintain clinical comparability.
1.8 Definition of Key Terms
Foreign Exchange Scarcity: Restricted access to US dollars for medical imports post-2023 devaluation
Out-of-Pocket Expenditure: Direct household payments for healthcare excluding insurance reimbursement
Catastrophic Health Expenditure: Medical costs exceeding 40% of household non-food income
Treatment Avoidance: Delaying or forgoing medically necessary care due to cost barriers
References
Adebayo, R. A., & Ogunleye, T. S. (2025). Currency devaluation and healthcare access in Nigeria. Health Policy and Planning, 40(2), 189–207.
Anambra State Ministry of Health. (2025). Healthcare financing report 2024. Awka: ASMH.
Central Bank of Nigeria. (2025). Foreign exchange market statistics. Abuja: CBN.
Eze, P. C., & Nwankwo, M. U. (2024). Import dependence and medical inflation in southeastern Nigeria. African Health Sciences, 24(3), 456–472.
Ibrahim, M. U., & Musa, A. S. (2025). Catastrophic health expenditure in currency crisis contexts. Journal of Health Economics in Developing Countries, 12(1), 89–104.
National Health Insurance Authority. (2025). Coverage and benefits analysis 2024. Abuja: NHIA.
Okafor, E. E., & Ezeani, C. O. (2024). Drug price escalation and treatment adherence in Nigeria. BMC Health Services Research, 24(1), 1234.
Oluwole, O. O., & Ibrahim, M. U. (2025). Health seeking behavior under economic shocks. Social Science & Medicine, 345, 116789.
World Bank. (2025). Nigeria health financing system assessment. Washington, DC: World Bank.