Nigeria’s multi-billion naira pharma industry shrinks as AFCFTA nears
Export falls 91%
Only few pessimists foresaw the takeover of Evans Medical plc by the defunct Skye Bank and the
tier-one First Bank in 2017.
The drug maker had invested hugely on the road to acquiring the soughtafter World Health Organisation’s prequalification, which gave it an opportunity to participate in international bids. But the dream of consolidating its international presence became a mirage as the bankers came for the jugular after a July 4, 2017 court order necessitated by loan
default.
If Nigeria’s local pharmaceutical industry were bed of roses, Swiss Pharma would not sell its assets to Biogaran-servier in March 2017. Those familiar with the company before its exit said the sale to the French company was based on financial crisis.
These two examples reflect the challenges facing Nigeria’s N400 billion drugmaking industry in the face of the imminent African Continental Free Trade Area (AFCFTA) deal.
In 2014, companies like Emzor, GSK, and a number of others earned $7.708 million from export of medicines to the African market, according to the International Trade Centre (ITC). Four years later, however, the companies made only $708,000. Naira had weakened from N199/$ in 2014 to N360/$ in 2018 (80.9 percent), but export earnings fell by 91 percent.
With population growth and decreased drug export, drug importers raised their game, bringing in all forms of medicines into the economy, with imports standing at $513.9 million in 2018, as against $397.8 million in 2014 and $492 million in 2016.
Okey Akpa, chief executive of SKG Pharma and former chairman of the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), had said that increased import of medicines jeopardises Nigeria’s drug and national security.
“Local companies in the pharmaceutical industry are struggling to remain in business and some have gone into extinction. And to meet the shortfall in demand, import increases,” Gbolahan Ologunro, a research analyst at Lagosbased CSL Stockbrokers, said.
Neimeth International Pharmaceuticals plc made a loss of N139.2 million for the fourth quarter of 2018. It later posted only N5.45 million profit after tax in the second quarter of 2019.
The Agbara, Ogun Statebased Pharma Deko suffered 36 percent drop in revenue in 2018, from N1.593 billion in December 2017 to N1.023 billion in 2018. It suffered loss after tax of N265.26 million.
“The Federal Government placed a ban on the importation and sale of any pharmaceutical product that contains codeine phosphate. The ban affected the company’s sale of the flagship product – Parkalin Cough Syrup,” the company said in its financial statement ended December 31, 2018.
May & Baker, Fidson and a few others are in top performance due to factory expansion, new partnerships and deals, but a lot of unlisted companies have their feet in the waters.
Tomisi Akinyemi, a pharmacist at Healthplus Limited, said local pharmaceutical companies are shutting down in Nigeria while more importers are coming up.
“Most people now say that they don’t want chemical drugs but herbal supplements. Demand for herbal supplements is on the increase. Now, most companies import natural herbal supplements than the chemical ones,” he said.
One major crisis that hit pharmaceutical industry badly in 2016 was the Common External Tariff (CET) which provided for 5 percent to 20 percent tariff for importation of pharmaceutical raw materials and excipients but allowed finished medicines to enter into any country in the sub-region at no duty.
This happened amid dollar shortages caused by drop in crude oil sales, which shut down 54 manufacturing firms in 2016, according to the Manufacturers Association of Nigeria (MAN).
Capacity utilisation in the industry is below 50 percent, according to industry players, who complain that lack of a reliable petrochemical industry in the country means most raw materials are imported.
Nigerian manufacturers suffer from poor infrastructure and low patronage, which make them un-competitive in both local and global market.
Access to credit remains a major problem with lending rate to the manufacturing sector averaging 22.21 percent in 2018 and 22.84 percent in 2017, according to MAN.
“Many pharmaceutical companies are scaling down their operations because they cannot have access to funds. The industry is a sensitive one and needs a specialised funding scheme to save those still thinking of remaining here,” one senior manager in a pharmaceutical company said.
Ayo Akinwunmi, head of Research at FSDH Merchant Bank, reasoned that Nigeria is majorly an economy with little export drive.
“We don’t even produce enough to feed ourselves and we do not have competitive advantage in production,” Akinwunmi said.
Johnson Chukwu, CEO, Cowry Asset Management Limited, differed, saying the demand for local consumption of drugs is on the rise and the factors responsible for that are increase in population and improvement in terms of access to medical services.
Nigeria recently signed on to the African Continental Free Trade Area (AFCFTA), with the country’s pharmaceutical firms expected to rival those of South Africa and Morocco, which produce most of the drugs for their citizens.