Health Financing through Sports Betting Revenue in Nigeria

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By Olumide Okunola

Nigeria like several other countries on the continent have
been hit hard by the COVID19 pandemic but there was already in existence an ongoing epidemic prior to this period with significant public health implications –Gambling.

The negative consequences of gambling captured as “Gambling
Related Harm (GRH)” is driven by the meteoric rise in online gambling
opportunities and as such presents one of the most consequential tasks post-COVID-19 for policy makers.

I posit that revenues from gambling more broadly can serve dual policy objectives not only as a source of revenue but also as a deterrent. Such revenues need to be categorised in the same bracket as other well-known health “bads” such as alcohol, tobacco and sugary beverages with a potential to be earmarked as additional financing for healthcare in Nigeria.

Gambling revenues are already widely accepted as financing for sports in several countries.

Nigeria has identified Universal Health Coverage (UHC) as the goal of its health system and in this regard the country has a limited ability to raise public financing for health which is a sine qua non for countries moving towards UHC. Thus, for Nigeria to make progress in its UHC aspirations
it must expedite action on strategies to increase the share of total health
spending coming from public financing. Nigeria has one of the lowest public financing for health globally spending 0.5 per cent (2017) of its GDP in public health spending.

This is lower than both the regional average (2.4 per cent) and the average for its income group (2.8 per cent). The effect of COVID19 on the economy might worsen this situation.

In the period prior to the COVID-19 pandemic the combination
of increase in mobile phone penetration, internet access, online payment
options and liberalization of regulations on advertising led to a profound
proliferation of gambling in Nigeria. This was marked by a shift from the
traditional forms of gambling like pools, casino gambling and national
lotteries to new modes like sports betting and online betting amongst other
forms. Whilst the gambling industry would have suffered losses brought on by the COVID19 pandemic it is predicted that as part of rebuilding efforts the gambling industry will make an even greater push to online outlets thus increasing the availability of gambling options to pundits.

The level of participation in the gambling industry in Nigeria portends the size of the emerging problem. A study of the Nigerian general population found that 36 per cent of adult respondents had gambled of which 53 per cent are daily gamblers. Another study indicates that well over 70 per cent of Nigerian youths now indulge in gambling as a form of entertainment. These high numbers should not be surprising with the level of aggressive, unfettered advertisements and promotions undertaken by the betting companies. The mega sponsorship deals by betting companies in Big Brother Naija in 2019 (BETNAIJA) and 2020 (BETWAY) attests to this.

The gambling industry argues that its products are simply another form of entertainment, like going to movies and football games and as such consumers are willing to pay a price for entertainment. We think otherwise
and the rising cases of GRH justify this position. GRH exists in different
forms and affects the whole of society beyond just individuals. GRH causes financial harm, relationship disruption, emotional or psychological distress; decrements to health; reduced performance at work or study. The list is endless but important to point out that the concept of GRH is much encompassing and goes well beyond the issue of “problem gambling” which is the best-known negative consequence of gambling.

The humongous revenues generated by sports betting companies reflect the increasing participation of Nigerians in gambling. The habit comes at a cost as it is estimated that 60 million Nigerians between 18 and 40 years of age may be spending up to N1.8 billion on sports betting daily at an average
N3,000 (nearly $15). Proportionately, nearly N2 billion is laid out on sports betting in Nigeria every day, which turns into nearly N730 billion for a year.

We are describing a $2billion industry! Data from 2016 shows
the top ranked betting company(s) in Nigeria rake in an average monthly
turnover of $10m whilst other mid-ranked companies turn in an average turnover of $3m-$5m with a 20-30 per cent margin on profit. A report by PWC in 2018 revealed Nigeria as the second largest online gambling market in Africa with a Gross Gaming Revenue (GGR) of $58 million noting that the GGR will rise by 16 per cent over a five-year period.

It is important to note that the revenue raised by the gambling industry has successfully tapped into a demographic that has traditionally escaped the best efforts of governments to raise revenue. Sixty per cent of the Nigerian economy is in the informal sector and this is where most pundits lie. Not surprising given the level of technology and innovation that drives the gambling industry. It is argued that taxes from gambling are regressive that is – the poor are worse off.
This article has emphasised the role of public financing in the achievement of Universal Health Coverage (UHC) and efforts to enhance domestic revenue utilisation mobilisation (DRuM) as key to closing UHC financing gaps.

The revenues from gambling as a “demerit” good will be important to Nigeria’s DRuM efforts within the context of UHC. This article acknowledges the innovative efforts of the gambling industry in building an industry from a mostly informal economy but also warns of the perils of the rising prevalence of GRH that is the consequence of such an effort. In concluding we propose the following options for Nigeria as it ponders on the much-needed reform of its gambling tax policy.

There is a need to update the legislative framework governing gambling activities in Nigeria. Such legislation should protect vulnerable citizens from the perils of GRH. Gambling operators should be made to advertise and market in a responsible manner.

The rise of GRH suggests that gambling is a ‘demerit’ good to be discouraged in the interests of a wholesome society and thus efforts aimed at levying appropriate tax rates for such an activity may improve social welfare by reducing gambling activity.

Regulatory bodies should prescribe obligations for operators to connect to online surveillance system of competent authorities like the FIRS or CBN to ensure that real time relevant data including fiscal information is obtained. 4. The National lottery trust fund (NLTF) established under section 35 of the National Lottery Act specifies the achievement of national development goals through the promotion of access to lottery funding for good causes but the non-transparent distribution of funds by the NLTF makes
the case for a more explicit criteria through sectoral earmarks urgent.

It makes sense that the economic resources generated from gambling taxes be earmarked for desirable social purposes like financing healthcare in Nigeria as an additional but earmarked source of revenue. The Basic Healthcare Provision Fund (BHCPF) of the 2014 National Health Act provides a vehicle to implement this.

Okunola is a Senior Health Specialist with the World Bank, Nigeria / ookunola@ifc.org