The federal government continues to battle with the issue of insufficient pharmaceutical drug supply three years after the COVID-19 epidemic demonstrating how global shocks in logistics and supply can exacerbate the suffering of nations without self-sufficiency in generating key medicines.
Nigeria’s susceptibility to a declining medication supply is manifesting itself in a way that suggests COVID-19’s lessons have been rapidly forgotten.
Nigeria struggled to secure medical supplies and vaccines months after the outbreak started because the countries that usually lead foreign aid had to prioritise the internal demand from their citizens.
More than 70 countries imposed restrictions on the export of medical materials, including the raw materials needed to make diagnostics, during the early months of the pandemic.
It wasn’t until the Africa Centre for Disease Control and Prevention (ACDC) established the Africa Medical Supplies Platform in June 2020 that Nigeria could start procuring medical supplies at a pace that better met demand.
By the time 47 percent of people globally had been fully vaccinated and many countries were moving on to roll out booster doses, only about 3 percent of eligible Nigerians had been fully vaccinated.
But in 2023, drugs are disappearing from pharmacy shelves in Nigeria without a major outbreak, and local pharmaceutical companies are struggling to bridge the gap.
Most of them find it difficult to access foreign exchange to import products and raw materials, leading to sharp increases in the cost of the few supplies available.
Akinjide Adeosun, CEO at St. Racheal’s Pharmaceuticals said firms are grasping for air under a single-digit interest rate policy on loans, which works more as a disincentive for local drug production stuck around 30 percent of national demand.
Collaterals and multiple taxations are neither encouraging, as government agencies from the Federal Inland Revenue Service (FIRS) to the Nigerian Customs Service (NCS) and the Standard Organisation of Nigeria (SON) incessantly go after manufacturers to draw out levies.
“It is unfortunate that there are few financial interventions led by the government to empower the manufacturing industry. The harsh monetary policies are affecting local production and jeopardising the national drug security of the country,” Adeosun said.
Despite the thorns in his path, Adeosun is working to set up the biggest manufacturing plant in the country in the next five years, hoping that critical adjustments are made to improve the availability of financing for health entrepreneurs who have similar ambitions.
Casting light on how import reliance shapes Nigeria’s drug supply, Ayodeji Alaran, managing director, PBR Life Sciences, a healthcare firm that leverages data and technology, said about 2,000 medicine products were imported into Nigeria on average between 2018 and 2020.
However, due to the COVID-19 pandemic, there was a shortage of almost 200 units of products, which led to a steady decline in pharmaceutical imports.
Data from the International Trade Centre shows that Nigeria’s pharmaceutical imports dropped a second time to $1 billion in 2022 from $1.3 billion in 2021, marking a 23.4 percent decline.
It also represents a 63 percent decrease from $2.8 billion in 2020. Pharmaceutical exports reduced by 65.0 percent to $779 million last year.
Although local manufacturing increased, it hardly met demand.
“Pharmaceutical companies are really struggling to provide the medical needs of the population. They need to be supported. Asking them to go and seek finance at the regular interest rate is simply unsustainable,” Alaran said speaking at a finance forum convened by St. Racheal, a Nigerian pharmaceutical company.
Hurdles
Apart from the FX hurdle and inadequate financing options, poor power supply also inhibits drug makers. There was about a 125 percent increase in the cost of energy for companies that had facilities for manufacturing tablets between 2021 and 2022, according to PBR Life Sciences.
Drug makers sometimes lose their entire stock when a power outage traps products under processing in machines.
“The cost of energy to total revenue was about four percent, so much so that at the end of the day, when we looked at the mean profitability of some of these companies quoted on the stock exchange, they had about 5 percent profit after tax versus revenue, compared to banking, which had about 31 percent.
In terms of capacity utilization, Dimeji Agbolade, external affairs director at Sanofi Nigeria, a multinational pharmaceutical firm, said there is a lingering challenge of poor utilization of most factories’ capacity across the country, which invariably means that the less volume done, the higher the unit prices of drugs produced.
Nigeria’s idle pharmaceutical industry capacity is estimated at $4 billion. It holds growth potential that most stakeholders believe can be partly unlocked through contract manufacturing opportunities.
Yet, most companies operate with excess capacities to produce essential drugs, including capsules, tablets, syrups, and different forms of dosage for local and foreign franchises, according to the Pharmaceutical Society of Nigeria (PSN).
Solving funding
Ijeoma Ozulumba, executive director and chief finance officer, Development Bank of Nigeria, agrees that a lot of work needs to be done in providing finance to the manufacturing sector.
She said the persistent constraints in financing only limit the economic role of the pharmaceutical sector in terms of employment, foreign exchange generation, technological transfer, innovation value chain development, and import substitution.
Out of almost N5 trillion injected into the manufacturing sector in terms of loans and advances, only 17 percent of the total went to pharmaceutical manufacturing as of 2022, according to DBN data.
The share of non-oil exports that manufacturing has is about 36 percent. For everything that the country exports apart from crude oil, manufacturing contributes 36 percent and in terms of employment, 12 percent of the formal sector is employed in manufacturing.
“Moving from import substitution to having a global manufacturing mindset just like Indonesia and Malaysia should be the focus of the current administration. I think reading through the plan of the new administration is where the focus will be,” Ozulumba said.
She stated that financial institutions, with the support of the government, have a role to play in the areas of access to capital, investment financing of specialized parts of the manufacturing value chain, working capital support, infrastructure development, power supply, transportation, logistics, risk management, and insurance.
Since inception to date, DBN has disbursed N11.2 billion to the healthcare sector to improve access to health services and the conditions of Nigerians. 71 health micro, small and medium enterprises (MSMEs) have been supported with about N480 million across economically-disadvantaged regions, with the northeast and northwest being the primary focus.
It also developed a special programme, the interest drawback, which ensures that companies operating in manufacturing get some rebates at the end of their loan tenure.
Another measure it has taken is to provide long-term financing that goes as far as five to seven years in driving manufacturing and non-interest banking products targeted at the north, where conventional finance lacks appetite.
However, stakeholders expect more from financial institutions to building more large scale manufacturing and set Nigeria on the path to self-sustenance as countries like India, China, Brazil, and South Africa, among others.
Brazil, for instance, has a large and well-developed pharmaceutical industry, that is supported by government subsidies and tax breaks, and it has been able to achieve self-sufficiency in the production of many essential drugs.
China has the world’s largest pharmaceutical market, and the industry is growing rapidly. It produces a wide range of generic drugs, and it is also developing its capacity to produce more complex drugs.
India has a long history of pharmaceutical production, and the industry is now one of the largest in the world. India also produces a wide range of generic drugs and is also developing its capacity to produce more complex drugs.
South Africa has a well-developed pharmaceutical industry, which produces a wide range of essential medicines. The industry is supported by government regulations that require local production of essential medicines.
Read also: Nigeria’s pharmaceutical imports drop 63% in two years
These countries have achieved self-sustainable pharmaceutical production through a combination of government support, investment in research and development, and access to raw materials.
They are now able to produce the essential medicines that their populations need, and they are also exporting their products to other countries.
Even in countries with well-developed pharmaceutical industries, there will still be a need to import some drugs, especially those that are new or complex.
However, the countries listed above have made significant progress in reducing their reliance on imported drugs, and they are well-positioned to meet the pharmaceutical needs of their populations in the future.
