Okafor: Govt Must Protect Local Manufacturers
The Managing Director/Chief Executive Officer, May & Baker Nigeria Plc, Mr. Nnamdi Okafor, in this interview with Goddy Egene spoke on how the challenging operating environment is affecting manufacturing companies, saying the government must protect them
The Nigerian healthcare and pharmaceutical industry is highly import dependent because large number of products and inputs are imported. Considering the economic headwinds and especially the falling exchange rate, how do you see the immediate and longer term performance of the industry?
Here we are talking about the healthcare and pharmaceutical industry. It is a big industry. We know that the healthcare system is a critical sector for any economy and if you do not secure the health of your citizens, then the economy cannot progress well. So it is a critical industry and it is sad the way things are going generally in the economy, especially the pharmaceutical industry. If you want me to give you my honest assessment, I think on the short term, it is going to be very rough. A lot of things are not going in the direction they should go. And if care is not taken in the next three to four months, we will have a very serious crisis with respect to ability of the healthcare system to support the health needs of Nigeria especially with regards to having special medicines in the hospitals.
We remember those days when you go to hospitals you don’t have the consumables. You could have the doctors, nurses and pharmacists and they do not have what they need to work and that could very frustrating. We understand that the economy generally is down. But when the economy is down, there are some critical sectors that the government should be looking at. You have to ensure that food is available for your people, you have to ensure that the health of your citizens is taken care of and in the context of what we have today, I do not think that anybody is paying attention to what is happening in the health sector. So on the short term, I think it could become a crisis if not addressed.
However, I do not see this government, which I believe is a responsible government, allowing the situation to continue for too long. The point I am trying to make is that this is the time to intervene, we do not have to wait until it comes to a crisis level. Why I said so is that for the pharmaceutical manufacturing industry, which accounts for a sizeable essential medicines supplied in the country, we plan ahead. For us, we normally order our input materials about three to six months ahead, and what I will use to manufacture for the first quarter of this year, ought to have been ordered by September last year. And between September and December last year, it was difficult for us to be able to access foreign exchange(forex). So unfortunately I could not open up to 15 per cent of the Letters of Credit (LC) that I require to be able to ensure that I keep my factories running through this first quarter into the second quarter of the year. This does not just apply to me alone, it is an industry wide thing where manufacturers in the industry were not able to open LC and not able to bring in raw materials. And what we have in the market today were actually products manufactured in the last quarter of 2015 and I believe by the time these products are bought up, we are going to have some serious gap in the market. That is the challenge.
Looking at restriction on forex, some manufacturers have hailed the policy that it is a good omen for them. But what is the implication of the policy for the pharmaceutical industry?
I want to take it from the entire economy before narrowing it to the pharmaceutical sector. In my opinion, it is a very good policy because we have mismanaged our economy for a very long time. We have not been looking long term that is why we still have a mono product economy. There is no way out of the situation we found ourselves except what the Central Bank of Nigeria (CBN) is doing now. Where your income is coming down and your forex earnings are coming down, and your consumption of imported items is going up. So in that kind of situation, you need to do something, either to increase our earnings, which is clearly outside the control of the CBN or to reduce our consumption of imported items. What the CBN is trying to do is to see how we can reduce our consumption of imported items, so that whatever forex we are earning can go a long way to addressing the basic needs. So, to that extent it is a good policy.
But the challenge is that how the policy is being implemented. I believe that we could do better in that respect. There is a list of 41 items that are not meant to access official forex through the CBN, which is good because we do not have enough forex to go around everybody now. Then you will expect that it would help the manufacturers of essential products to access forex. But the question is, is this happening? My answer is no. Generally, manufacturers are saying we are happy with the fact that some of the products that are coming into the country that need not to come in the first place are now being stopped from coming in. That is enough for us to hail what the CBN is doing and when that happens, Nigerians will begin to look inwards and begin to patronize those products that are manufactured in Nigeria. But I had talked earlier about the fact that some of us, who manufacture locally and who depend on input materials, are running out of stocks of such materials. So very soon, Nigeria will not be able to find some of those products that are manufactured locally and that is the danger. Some manufacturers that are lucky to access their input materials locally will be okay because they will continue to manufacture and Nigerians will continue to patronize them. To that extent, the policy is doing well and we will soon begin to see increased patronage of locally manufactured products. But to the extent of those industries or sectors that must import their input materials, there is a major problem. What CBN needs to do is to find out what is happening to the little forex that they are giving out. The CBN should able to look at the sectors that are critical to the economy and ensure that the forex allocation gets to those sectors. Sectors like the pharmaceuticals, power and energy for electricity and fuel for people to move around. It is shocking that for the whole of last quarter of 2015, we could not get LCs established. We had at a point 50 LCs to be established but we could not get to do most of it. Our bankers could not do one for us in three months. The question is the little forex that is coming out and is meant
The other thing that government needs to do is to protect the manufacturing sector. We will be deceiving ourselves if we believe that our economy generally and manufacturing sector in particular are in a position to compete globally at this time. We are not yet competitive for obvious reasons- poor infrastructure and so many factors that are working against us