Tinubu suspends import duties, VAT on medical supplies

President Bola Tinubu has signed an executive order to suspend import duties and value-added tax on essential medical supplies imported into the country.

This is aimed at easing the high cost of locally producing pharmaceuticals, diagnostics, and medical devices such as needles and syringes, and biological among others.

Muhammad Ali Pate, minister of Health and Social Welfare announced the development on Friday, saying the Minister of Justice and Attorney General of the Federation is expected to take necessary action towards codifying the new order.

“The order is pivotal to the success of the Initiative for Unlocking the Health Care Value Chain which was approved in October 2023 by the President,” Pate stated.

“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.”

According to the minister, specified items include active pharmaceutical ingredients (APIs), excipients, and other essential raw materials required for manufacturing of crucial health products like drugs, syringes and needles, long-lasting insecticidal nets and rapid diagnostic kits, among others.

The order also provides for establishing market shaping mechanisms such as framework contracts and volume guarantees, to encourage local manufacturers, the minister noted.

Read also: Tinubu signs Executive Order removing tariffs, VAT on health sector equipment

In addition, Pate stated that the order mandates collaboration between the ministers of Health, Finance and Industry, Trade and Investment to develop a harmonized implementation framework, expediting regulatory approvals and reducing bottlenecks.

Also agencies including the Nigeria Customs Service, National Agency for Food and Drug Administration and Control, Standards Organisation of Nigeria, Federal Inland Revenue Service will be tasked to ensure swift implementation, with special waivers and exemptions effective for two years.

“The implication of this order is pivot towards market-based incentives to encourage medical industrialization, reducing costs of medical products through import substitution over time, creating and retaining economic value and enabling job creation in the healthcare value chain,” Pate said.

Challenge

BusinessDay had reported that 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.

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 this, 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 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 drug 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 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.

Also 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, analysts say it is self-sabotage to stifle that process with crippling charges.

“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 this specialised equipment to attract zero duties when it involves increasing the capacity for local production.