Nigeria’s pharmaceutical industry is likely to continue facing broad-based challenges, including a weak business environment that threatens to heighten the sector’s risks to declining investment, according to Fitch Solutions.
Nigeria has a weak operating environment which contradicts its own rationale behind the ‘Five Plus Five-year Validity (Migration to Local Production)’ policy. Under this policy, a newly registered imported product is given five years of initial registration plus another five years of renewal registration to migrate to local production.
Regards the policy, the transition can be made through a partnership with a Nigerian company or multinationals setting up a local manufacturing plant in Nigeria for finished pharmaceutical products, among others. Failing to do so would cancel the product’s registration, preventing its importation and distribution in Nigeria.
“…A poor operating environment will continue to present major drawbacks to investment, while multinational drugmakers will seek strategic partnerships with already existing local manufacturers.”
Fitch Solutions
According to Fitch Solutions, the country’s electricity and fuel shortages continue to be a costly impediment to industrial activity in the country, including pharmaceutical manufacturing.
Another issue is that companies continue to face risks in terms of currency conversion. For instance, as at May 2021, the Central Bank of Nigeria confirmed that it would further devalue the currency after previous devaluations in 2020.
Fitch Solutions explains that the continued downwards pressure on the unit in the form of a persistent current account deficit and declining foreign reserves will present risks to the cost and ease of converting between Naira and dollars. This in turn hinders the attractiveness of the market to foreign multinationals.
Domestic production of pharmaceutical products to increase
Furthermore, although Nigeria has a large pool of labour relative to other countries in sub-Saharan Africa owing to its vast population, skilled labour remains low.
This means that businesses seeking skilled workers for pharmaceutical manufacturing would need to invest extensively in training or the recruitment of skilled foreign workers.
In the latter case, Fitch Solutions highlights that it remains considerably difficult and time consuming to import foreign workers across all sectors in the country.
Moreover, the high level of industry-associated risks in Nigeria’s pharmaceutical market will also continue to hamper investment in the country, Fitch Solutions avers.
Nigeria’s pharmaceutical regulatory infrastructure remains inadequate, providing no meaningful patent legislation or pricing and reimbursement systems. On these fronts, Nigeria underscores both the regional and global average.
Given the above weaknesses, Fitch Solutions expects that the presence of multinational presence to therefore be through strategic partnerships with already existing local manufacturers.
Despite these headwinds that threaten to truncate the growth performance of the country’s pharmaceutical sector, Nigeria’s pharmaceutical sector will experience an increase in domestic production of pharmaceutical products.
Based on Fitch Solutions forecast, Nigeria’s pharmaceutical market will grow by a CAGR of 10.2% in local currency terms and 5.7% in US dollar terms to reach NGN3.1trillion (US$5.7 billion) by 2030.
“Nigeria will continue to provide incentives for its local pharmaceutical industry in support of the country’s efforts to diversify its economy.
“The ‘Five Plus Five-Year Validity (Migration to Local Production)’ policy will encourage domestic manufacturing of pharmaceutical products and support market growth.”
Fitch Solutions
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