• Tuesday, June 25, 2024
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BusinessDay

FG fails to lift import levy despite rising medical costs

Medical costs may rise as operators struggle to keep lights on

The federal government has failed to lift the crippling levy on medical imports despite its spiral effect on the surging cost of health services.

Healthcare providers, pharmaceutical manufacturers, and drug distribution businesses face about 5 to 25 percent customs levy on imports of essential medical commodities, including raw materials for production, BusinessDay’s findings show.

They also grapple with product registration charges that do not give recourse to the reality that patients pay the price.

On paper, medical and pharmaceutical products are exempted from the standard value-added tax of 7.5 percent, alongside machinery for use in export processing zones and certain basic food items.

But despite the rhetoric that the Nigerian Customs Services is managing the delicate balance between revenue generation and safeguarding lives, healthcare businesses are reeling.

Cameras for medical or surgical examination of internal organs attract 20 percent import duty and 7.5 percent VAT, under what the customs management tag as the implementation of the ECOWAS Common External Tariff (CET) 2015 to 2019 and the 2015 fiscal policy measures.

Respiratory support systems such as ozone therapy, oxygen therapy, aerosol therapy, and artificial respiration attract five percent import duty.

Medical imaging devices including electro-cardiographs, ultrasonic scanners, magnetic resonance, and ultra-violet apparatus attract a five percent import duty.

Syringes, with or without needles attract a 65 percent import adjustment tax (IAT) while surgical needles and dental equipment attract a five percent import duty.

Pharmaceutical packaging materials such as gelatin capsules attract 25 percent.

“There was a 20 percent duty on medications many years ago. The government removed it but then called something else, a CET levy, and still charges 20 percent,” Samuel Okwuada, CEO and co-founder of Remedial Health, a health tech company transforming the pharmaceutical supply chain, told BusinessDay.

“If I bring in a container of diabetes drugs and it costs me N100 million and I am to pay 20 percent duty in whatever name, what it simply means is that I’m spending N120 million. I’m not going to absorb the 20 million added. I’m going to pass it on to the customer. Just by removing that layer, you will have a direct impact on the price of this medicine,” Okwuada said.

Okwuada, like most key players in the health sector believe that the singular action of lifting such levies can immediately lower the cost of essential medicines for many struggling Nigerians.

Analysts say it is self-sabotage to stifle imports with crippling charges, given that about 75 percent of the medicines and consumables in Nigeria are sourced mainly from India and China, making the medical supply value chain highly vulnerable to exchange rate movements.

“You have a pharmaceutical industry that is 100 percent dependent on the dollar. That’s the number one problem. The government should be thinking of how to support this industry’s growth,” Okwuada added.

“We haven’t thought about the high cost of manufacturing in Nigeria today, whether it is electricity and the lack of it or the cost of transporting items from one place to the other in Nigeria. We are not thinking of all those things.”

Okey Akpa, chairman, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN) at a consultative forum in March canvassed for specialised equipment to attract zero duties when it involves increasing the capacity for local production.

Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, at a separate forum promised to intervene in addressing challenging taxes on life-saving medical equipment, accessories, and raw materials for drug production.

He said the government had plans to create new harmonised codes and tariff lines as well as establish special corridors for expedited clearance of pharmaceutical imports and exports.

These plans remain to be seen.