Background Neonatal illnesses usually require long hospital stays and specialized care and/or facilities, which usually results in huge medical bills. With more than 70% of people in Nigeria living on less than US 2perday,thesebillsarenotaffordabletomanyfamilies’livelihoods.AimThisstudyaimstodeterminetheaveragecostofmanagingneonatalillnessesinEnuguinsoutheastNigeriaandtheproportionoffamilyincomespentontheseillnesses.Itfurtherseekstoascertainthecostofvariouscomponentsinthemanagementofneonataldiseases.MethodsThisisalongitudinalanddescriptivestudyinvolving106newbornsadmittedtothesickbabyunitoftheEnuguStateUniversityTeachingHospitalandtheout-of-pocketmedicalexpenditureinthemanagementoftheirillnesses.ResultsAhundredandsixnewbornsparticipatedinthestudy.All(100%)medicalbillswereout-of-pocketpayments,and103(97.2%)ofthesewerecatastrophichealthexpenditure(morethan10%oftotalfamilymonthlyincome).Theaveragedurationofhospitalstayandcostofmanaginganeonatalillnesswas12.86±8.81daysand₦36,382±19,389.72(US 223±119), respectively. This expenditure amounted to 157%, 71%, and 25% of total monthly family income for the low, middle, and upper socioeconomic class families, respectively, with a mean percentage of 85%. Families with a total monthly income of less than₦ 10,000 (US 61),₦10,000–49,999(US 61–306), and₦ 50,000–100,000 (US 306–612)andmorethan₦100,000(US 612) on average spent 683%, 108%, 54%, and 20% of their monthly income on their newborn’s illness. Hospital and utility bills compared with bills accruing from drug and laboratory investigations account for a significantly larger proportion of total cost incurred in neonatal sepsis (₦ 23,499±14,987 US 144±92,P=0.001),lowbirthweight(₦39,863±24,003US 224±147, P= 0.001), severe anemia (₦ 40,504±13,923 US 248±85,P=0.001),transienttachypneaofthenewborn(₦10,083±1,078US 62±7, P= 0.001), birth asphyxia (₦ 24,398±14,096 US 149±86,P=0.001),andmeningitis(₦26,731±7,675US 164±47, P= 0.001), whereas cost for laboratory investigations was significantly higher for neonatal jaundice (₦ 11,690±3,169 US 72±19,P=0.001).Therewasastrongpositivecorrelationbetweendurationofhospitalstayandtotalmedicalcostincurred(r=0.897,P=0.001).ConclusionHealthexpenditureonneonatalillnessishighandleadstocatastrophicexpenditureforthemajorityofhouseholdsinthestate.ThereisaneedforeffectivehealthinsuranceschemestohelpsubsidizeandcushionthisdisastrousandimpoverishinghealthexpenditureonfamiliesforimprovedneonatalsurvivalinNigeria.