How Impact Investors Can Respond to the Coronavirus Pandemic

Corporate Finance & Capital Markets

30th June 2020.

Olayanju Phillips

The Coronavirus (“COVID-19”) pandemic has exposed the cadaver of Nigeria’s health sector. It continues to put a spotlight on the need for meaningful investment in healthcare. Although the government at State and Federal level has responded through several measures, the private sector still has a role to play in supporting these governmental efforts. With the economic crunch and reduced investment opportunities for investors, impact investment in the health sector provides an opportunity for investors to sustainably improve the private health sector, while earning significant returns.

At the time of writing, there are 14,995 active cases of coronavirus infection in Nigeria. On the 6th of May, it was reported that there were about 3,500 available bed spaces for coronavirus patients across the country. Following this, the Lagos State Government raised alarm that it is running out of isolation and treatment spaces. Meanwhile, Lagos remains the epicentre of coronavirus infections in Nigeria. The health sector battles several challenges in its fight against the virus, including scarcity of test kits, protective equipment and ventilators, poor power supply, and inadequate medical personnel.

The response of the Federal Government of Nigeria includes a N100,000,000,000.00 (one hundred billion Naira) credit support intervention for the healthcare industry through the Central Bank of Nigeria, to strengthen the sector’s capacity to meet potential increase in demand for healthcare products and services. The Federal Competition and Consumer Protection Commission (“the Commission”) has also excluded cooperation/arrangements between companies in the health sector solely to respond to the pandemic from the purview of the Federal Competition and Consumer Protection Act, subject to the Commission’s authorisation.

The private sector, in partnership with the Federal Government of Nigeria, the Nigeria Centre for Disease Control, and the World Health Organisation, has formed a taskforce, Coalition Against COVID-19 (CACOVID), to mobilise private sector resources to support heath facilities to respond to the crisis. The taskforce is providing and equipping medical facilities, such as testing, isolation and treatment centers, across the nation. It has raised about N27,000,000,000.00 (twenty-seven billion Naira) and has a goal of raising N120,000,000,000.00 (one hundred and twenty billion Naira). All On, an off-grid energy impact investing company, has also invested N180,000,000.00 (one hundred and eighty million Naira) in four renewable energy companies, to provide solar power for emergency health centers in support of the response to the pandemic. In addition, Guaranty Trust Bank, in partnership with the Lagos State Government, set up a 110-bed isolation and treatment centre at the former Onikan Stadium (now Mobolaji Johnson Arena).

The COVID-19 pandemic has exposed several gaps that cannot be met solely by government, making a compelling case for impact investment. As institutional investors pull out of the market ahead of an anticipated economic downturn, impact investment provides an opportunity for investors to maximise their impact, while earning returns on investment in the health sector. Strategic impact investment can build a sustainable, resilient, and robust public health infrastructure to bridge the gap in the health sector. Investment may be seeded in constructing hospitals, establishing biotech companies that develop vaccines and testing kits, providing resources for manufacturing companies that produce medical supplies, investing in technology that monitors health conditions and assists with contact tracing, and investing in human capital for public emergency management. Impact investors may also provide capital to small businesses and continuous access to healthy food in rural communities. These investments will meet immediate needs and increase the capacity of the heath sector to prepare for future crisis.

A ready example of impact investment in response to the virus is the launch of a mobile testing centre in Yaba, Lagos by Lifebank, a health tech logistics startup. This was developed in partnership with the Nigerian Institute of Medical Research (NIMR) and with backing from investors, including UTL Trust Management Services Limited, Sterling Bank, Iyin Aboyeji, and Subomi Plumptre.

According to Partech, a global investment firm, impact investment may become more common post-COVID-19. Partech’s general partner, Romain Lavault has stated that every venture capitalist will eventually be a social impact investor. Investors and fund managers in Nigeria must go beyond investing in fixed income assets that preserves their initial capital, to investing in sustainable solutions in response to the pandemic. Funds like Hawthorne Effect in the United States of America are collaborating with Verily in Project Baseline in California Bay Area to establish staffing sample collection sites and performing remote location testing. ImpactAssets DAF, a donor advised fund, is providing funds to a company that is developing a COVID-19 vaccine.

There is an increasing demand for quality healthcare in emerging markets and government lacks the resources to meet the healthcare needs of the citizenry. This creates market opportunities for investors to meet unmet demands. The private health sector is underfinanced in many markets, particularly developing countries, yet the potential for growth is huge. Healthcare expenditure in Nigeria is predicted to reach N5,762,061,000.00 (five billion, seven hundred and sixty-two million and sixty-one thousand Naira) by 2021, growing at a compound annual growth rate of 8.35% year on year. Maya Horgan-Famodu, CEO of Ingressive Capital, has stated that the health sector in emerging markets is growing significantly with a potential for a 10-digit-plus exit.

Investment opportunities in Nigeria’s health sector include healthcare consulting, managed care, laboratory and imaging diagnostics, micro-insurance, pharmaceutical medicine, pharmaceutical distribution services, medical emergency evacuation services, specialist and general outpatient clinics, and medical billing services. The potential to achieve both attractive financial returns and measurable social impact, makes a compelling case for impact investors to focus on Nigeria’s healthcare.

For further information on this article and area of law, please contact Olayanju Phillips at:

S. P.A. Ajibade & Co., Lagos by telephone (+234 1 472 9890), fax (+234 1 4605092) mobile (+234.809.990.0344) or email: [email protected]).