Pharmaceutical firms’ profits hit decade-high on tax waiver, stable naira

Nigeria’s pharmaceutical manufacturers have delivered their strongest earnings in at least a decade, signalling a sharp reversal from years of margin squeeze buoyed by currency volatility and steep import dependence.

Drug manufacturers listed on the Nigerian Exchange Limited more than doubled their full-year incomes in 2025, rising from N6.5 billion in 2024 to N14.8 billion, thanks to the stability of the naira and tax waivers that helped sustain growth amid still weakened purchasing power.

Neimeth International Pharmaceuticals delivered the most dramatic swing. The company moved from a N885.3 million loss in 2024 to a N982.1 million profit in 2025, reversing consecutive years of red ink.

Valentine Okelu, managing director and chief executive officer of Neimeth International Pharmaceuticals, directly linked the turnaround to the waiver.

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“The era of losses has ended. Neimeth has returned to profitability. The implementation of the Federal Government’s tax waiver for pharmaceutical raw materials has assisted in reducing production costs and accelerating organisational growth. 2025 marked a decisive turnaround,” Okelu said.

The financials support his position. Neimeth’s gross profit rose to N3.3 billion, while cost of sales fell to N2.5 billion from N4.0 billion in 2024, a rare contraction in input costs in an inflationary environment.

Fidson Healthcare Plc, the sector’s largest listed player, posted a 61 percent increase in profit after tax to N9.31 billion in 2025. Gross profit expanded to N49.1 billion from N35.1 billion a year earlier, reflecting stronger margin protection despite elevated operating expenses.

May & Baker Nigeria Plc also reported record earnings, with profit after tax rising to N4.45 billion in 2025. Gross profit climbed to N13.1 billion, supported by improved domestic demand and supply gaps created by multinational exits.

Patrick Ajah, managing director of May & Baker, described the waiver as critical but cautioned against policy inconsistency.

“The executive order on customs duties and raw materials for local producers has been waived by the government. It’s fantastic, and it needs to be continued. But we need consistency. We need to increase capacity for local companies to take care of our people instead of depending on foreign companies,” Ajah said.

Tax reliefs to the rescue

At the centre of the rebound is a Presidential Executive Order signed on June 28, 2024, and implemented on March 5, 2025, which exempted 875 pharmaceutical raw materials from Value Added Tax (VAT) and import duties.

Muhammad Ali Pate, the coordinating minister of Health and Social Welfare, said that “the order introduces zero tariffs, excise duties and VAT on specified machinery, equipment and raw materials, aiming to reduce production costs and enhance our local manufacturers’ competitiveness,” including specified items like Active Pharmaceutical Ingredients (APIs), excipients, other essential raw materials required for manufacturing of crucial health products like drugs, syringes and needles, Long-lasting Insecticidal Nets (LLINs) and Rapid Diagnostic Kits, among others.

For an industry that imports roughly 95 percent of its active pharmaceutical ingredients (APIs), the policy has altered cost dynamics almost overnight.

Drug makers grappled with a punishing cycle in which naira depreciation, port charges, and rising input costs wiped out operating gains. That cycle appears to have vanished.

FX stability drives earnings growth

The 2025 earnings surge was not driven by tax relief alone. Relative foreign exchange stability prevented a repeat of the sharp translation losses recorded in 2024.

Neimeth reported a foreign exchange gain of N48.1 million in 2025, compared with a loss exceeding N2 billion the previous year. Fidson’s net exchange difference moderated year-on-year, reflecting reduced volatility in the naira, which closed 2025 around N1,448 per dollar.

The combined effect of duty exemptions and FX stability allowed cost savings to flow directly to the bottom line. This dynamic was largely absent during the peak of the currency crisis.

Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said pharmaceutical manufacturers are among the clearest beneficiaries of the reform cycle.

“The stability in the forex market and the gradual shift toward local substitutes give an advantage over those who are importing. The government introduced waivers to ease the cost of importations for pharmaceuticals; these segments are likely to record stronger returns on investment under current reform conditions,” Yusuf said.

Investors are beginning to price in the shift. In its 2026 asset allocation outlook, CardinalStone Research projected a 28.7 percent equity market return, citing healthcare as one of the sectors likely to benefit from valuation re-rating driven by earnings expansion and relative FX stability.

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With the waiver scheduled to run until March 2027, companies are accelerating capital expenditure to convert temporary fiscal relief into long-term capacity.

Fidson committed N7.83 billion in 2025 to expand its WHO-compliant facility, more than doubling investment for the prior year. Neimeth secured shareholder approval for a N20 billion capital raise to complete its Amawbia plant. May & Baker invested N6.37 billion in property, plant, and equipment to scale production of branded generics.

Despite the record profits, structural vulnerabilities remain. Nigeria still depends heavily on imported APIs, and public health capital releases have lagged behind budgetary allocations.

Mojisola Adeyeye, the director-general of the National Agency for Food and Drug Administration and Control (NAFDAC), said the decline in import dependence reflects steady, if gradual, structural progress.

“Nigeria’s dependence on imported medicines has reduced from 70 percent to 60 percent. That tells us that local manufacturing is improving, but we are not where we need to be yet,” she said at the 2025 Investiture and Public Lecture of the Nigeria Academy of Pharmacy in Lagos.

On regulatory reforms, Adeyeye pointed to the agency’s “5+5” policy as a catalyst for localisation. “Companies importing medicines that can be produced locally are given a final five-year renewal. After that, they must manufacture locally or partner with Nigerian producers.”

“That policy has driven investment and encouraged importers to become manufacturers,” she said, noting that more than 30 percent of new pharmaceutical firms emerged from that framework.