The Role of Foreign Direct Investment in Strengthening Nigeria’s Healthcare System

Abstract

This study is motivated by the persistent challenges facing Nigeria’s healthcare system and the growing expectation that external capital can strengthen health sector performance, this study investigates the role of Foreign Direct Investment (FDI) in improving healthcare outcomes between 1980 and 2024. Specifically, it evaluates how FDI influences healthcare infrastructure, service delivery, and long-term population health sustainability. The study adopts a Vector Autoregressive (VAR) model to examine dynamic interactions among FDI, out-of-pocket health expenditure, life expectancy, trade openness, and physician supply. Empirical findings indicate that FDI has a positive but statistically weak effect on both out-of-pocket spending and life expectancy, suggesting that although foreign investment contributes to capital formation and infrastructural expansion, its short-run influence on affordability and access to care remains limited. Results also reveal a negative relationship between physician availability and trade openness, implying that globalization pressures may intensify medical brain drain. Policy implications emphasize aligning foreign investment with national health priorities through targeted incentives, workforce development, health education, and strategic infrastructure financing. Improving welfare conditions for medical professionals is also essential to curb migration and strengthen service delivery.