Monday, May 11, 2020 / 12:22 PM / By
Olubunmi Abayomi-Olukunle / Header Image Credit: Global Times
"We think that it may not be altogether sustainable for Nigeria to continue to rely on philanthropic contributions and /or public funds to scale Nigeria's ability to diagnose, isolate and care for COVID-19 cases. The context for this view is in part, guidance from the World Health Organisation (WHO), that, (a) COVID-19 indeed has a distinct capacity for explosive spread and has overwhelmed the most resilient health systems and that (b) countries need to scale their ability to rapidly identify, test and treat patients.
"Speed, scale, and equity must be our guiding principles. Speed, because the explosive nature of the virus means every day lost in implementing effective response capacities and behaviours costs lives; scale, because everyone in society has a part to play in building the capacities required to control this pandemic; and equity, because everyone is at risk until the virus is controlled everywhere in the world: collective resources must be directed to where there is greatest risk..." World Health Organisation
To scale its national healthcare capabilities, Nigeria needs to articulate a more coherent legal framework for managing the diagnoses, isolation and caring for all cases of COVID-19. That framework, has to be resilient in the sense that, it is able to attract and channel private capital into the operation of COVID-19 isolation, testing and treatment facilities. This is especially, true as we are now re-opening the economy.
Based on a recent client engagement, here are some considerations that we think are useful for both government, private investors , philanthropists and other concessional funders.
1.Clear & Standardized Guidelines on Establishing and Operating Isolation, Treatment and Caring Facilities
It's important for the NCDC to now publish and enforce clear operational guidelines that specify the minimum standards for setting up private and public isolation and treatment centres. The operational guideline will provide predictability, a critical driver of private capital. Amongst others, an operational guideline would provide a level-playing field for operators and aim to standardize the operation of these facilities. More importantly, the guidelines will provide a firm legal basis upon which ethical and professionally acceptable behavior can be objectively measured and enforceable. There could also be other health implications, arising from the absence of nationally applicable standards, as would be the case in the event of nosocomial or other hospital-acquired infections . A number of recent developments in Covid-19 isolation and caring facilities in some northern areas of Nigeria also highlights the need for nationally applicable guidelines for operating COVI-19 isolation and treatment facilities.
Private investors will have to look to the cash flows from isolation and treatment of patients in terms of medical bills. The "free" treatment approach may not be sustainable for private capital without a defined subsidy scheme that has a legal backing and ensures that only the patients that can't afford treatment get access to the subsidy. This approach should deal in part, with the moral hazard, that a free COVID-19 treatment approach may engender. Additionally, Nigerians who want and can afford private treatment should have access to it at the right price. We think that using the right contractual structures, private investor can look to the cash-flow from the "private" treatment of COVID-19 patients. The primary consideration for private capital here is for Government to enable a contractual framework that will drive the efficient flow of private capital and protect private capital from transaction and counter-party risks that the Government is better able to manage within the context of the COVID-19 outbreak. Joint venture structures are one of the common structures that used to balance private interests and the government's strategic interest in driving public health and safety. Such joint ventures could be incorporated or unincorporated, depending on the peculiar requirements of each transaction. We generally recommend unincorporated joint ventures for partnerships of this nature, especially where parties are keen on flexibility and second-level limited liability. As a primary structuring consideration, such structures would ideally and by design embed the key motivations and risk tolerance of the respective financial investors and/or strategic investors.
It's important for both local philanthropic funders and concessional financers to be aware that certain existing structures may be caught by the provisions of the Procurement Act and the relevant procurement laws in states of the Federation, like Lagos State. Specifically, philanthropic funders and concessional financers may be exposed to legal risk arising from a breach of the respective procurement federal and state procurement laws. Most procurements laws have clear provisions on the standards that procurement agencies and private contractors/service providers must comply with in emergency situations and those provisions typically capture emergency situations like disaster, catastrophe, war, insurrection or an act of God. The risk of legal exposure here may depend on the type of structure adopted in a particular situation, although structures that envisage transfer/sale of isolation and caring facilities to government will most likely require a legal review from a procurement standpoint. More importantly, the Bureau of Public Procurement recently published COVID-19 Guidelines relating to emergency procurements and concerning contractors, procuring agencies and funders, here.
Nigeria should contemplate formal blended finance strategies for scaling national structures for detection, isolation and treatment of COVID-19 patients. Perhaps, the most important point to note about designing formal blended finance structures is that blended finance structures are grant or grant-like resources aimed at removing the barriers to mobilizing capital flows and private investment. Guaranteeing the availability of land or other physical infrastructure for use by a private investor for the operation of a COVID-19 facility may achieve some blending objectives as well as more formal market interventions like advance market commitment structures (AMC). Using AMC structures, the government or other local philanthropic funders can guarantee the future purchase of or payment flows for a service/product if delivered at a certain price and standard, using measurable indices. AMCs can be used to accelerate innovation around COVID-19 detection, isolation, treatment and caring in many other respects. Suspension of import duty on the importation of medical products as the Nigerian government has done recently, can also be used by the Nigerian government, to create capture commercial value within the context of formalised blended finance structures.
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