As part of Nigeria’s tax reforms, the government has exempted traditional medical services from Value Added Tax (VAT) while imposing the levy on digital health services. Industry experts warn that this disparity could stifle innovation and threaten the future of the digital health sector.
Under the new Nigeria’s Tax Act, medical services such as physical diagnostics, surgeries, pharmaceutical products and hospital treatments are exempted from the 7.5 percent VAT. The government said the exemption was aimed at making basic healthcare affordable to all citizens. However, this relief does not cover any services delivered digitally. To wit, health solutions such as online pharmacy platforms and telemedicine consult are placed within the sharp claws of the VAT.
Analysts say separating the means of delivery even when the service rendered remains the same is more of a disservice to the whole healthcare system. Studies show that instead of innovators channeling scarce capital into improving software, expanding medical outreach, or subsidising care for low-income patients, they would be forced to spend heavily on complex electronic invoicing, VAT reporting, and automated audit trails to avoid regulatory penalties.
The regulatory disparity functions as an innovation penalty, fundamentally altering how digital health providers structure and price their services. Because VAT is ultimately passed down to the consumer, it compounds the financial burden in a country where out-of-pocket healthcare expenditure already exceeds 70 percent, according to the World Bank. Imposing a 7.5 percent VAT on remote consultations and digital prescriptions carries risks that extend far beyond economics. Such pricing threatens to marginalise Nigerians, pushing life-saving care out of reach.
Experts argue that taxing digital health services in a country where one doctor attends to over 5,000 patients represents a risky gamble with Nigeria’s healthcare future. This disturbing national doctor-to-patient ratio, resulting from mass professional emigration, falls far below the World Health Organization’s recommended standard of one doctor per 600 patients.
Beyond this shortage, reports indicate that 70 percent of Nigerians delay or avoid hospital visits due to unaffordable out-of-pocket costs and associated expenses like transportation. For millions of Nigerians, accessing healthcare requires immense physical travel. In rural regions across Kano, Zamfara, and Enugu, patients must still travel an average of 10 to 35 kilometres to reach the nearest facility.
Industry experts maintain that digital innovation offers the solution to these accessibility challenges. Data from the Nigerian Communications Commission reveals that the country’s over 180 million active lines that pushes mobile penetration above 70 percent provides the essential infrastructure for digital healthcare access.
While the digital health sector is projected to reach ₦185.6 billion in revenue by the end of 2026, private platforms such as iWello and Awadoc have already leveraged this connectivity to provide immediate, location-independent care. Experts contend that prioritising the medium of delivery over the service itself creates a financial roadblock against the very technological advancements required to democratise healthcare. This approach potentially deters $1.5 billion in long-term foreign investment.
To address some of these issues, a study recommends that, “Nigeria should amend pharmacy and drug laws to formally recognise e-prescriptions, develop a secure national prescription verification system, link prescriptions to national digital health IDs, integrate the system with NHIA reimbursement mechanisms, and mandate acceptance of verified digital prescriptions by all licensed pharmacies.”
