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Impact of pharma firms’ exit from Nigeria

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By Abraham Adekunle

A critical analysis of its effects on Nigeria's health sector and economy.

In recent years, Nigeria has witnessed an exodus of pharmaceutical companies, both small enterprises and major multinational giants. This event has sent shockwaves across the nation’s business landscape, raising concerns about its impact on the health sector and economic stability. The departure of these crucial players responsible for manufacturing life-saving medications has far-reaching consequences, necessitating a closer examination of the situation and potential solutions. The Nigerian business climate has experienced notable shifts, especially in 2023, marked by economic challenges and policy changes.

President Bola Tinubu’s administration’s decision to terminate gasoline subsidies in May 2023 triggered a cascade of events, leading to the closure of approximately four million small companies within a short period. This wave of closures underscored the harsh realities of operating in Nigeria’s economic environment. The pharmaceutical industry, being a cornerstone of healthcare and economic resilience, suffered a severe blow as multinational pharmaceutical companies opted to either exit the country entirely or scale back their operations. This departure not only threatens the nation’s health but also poses challenges to its economic well-being.

Pharmaceutical industry has evolved over the years.

Understanding the historical context of Nigeria’s pharmaceutical industry is crucial to grasp the gravity of the current situation. The sector’s evolution can be traced back to the pre-colonial era when traditional medicine prevailed as the primary healthcare system. Over time, especially during the colonial and post-independence periods, efforts were made to transition to modern pharmaceuticals to meet the healthcare needs of a growing population. Regulatory bodies like the National Agency for the Control of Food and Drugs (NAFDAC), established in 1993, have played a pivotal role in ensuring quality standards in drug production and usage.

Despite the progress, challenges such as inadequate infrastructure, funding gaps, policy inconsistencies, and reliance on imported raw materials persisted, impeding the industry’s sustainability. The exodus of major pharmaceutical companies from Nigeria between 2015 and 2023 reflects a troubling trend heightened by various factors. Industry giants like GlaxoSmithKline Consumer Nigeria Plc and Sanofi-Aventis Nigeria Ltd cited challenges such as meeting demand, currency shortages for importing ingredients, and unfavourable business conditions as reasons for their exit. The business environment in Nigeria presents numerous hurdles for pharmaceutical companies. Volatile exchange rates, high import duties, complex regulatory processes, and bureaucratic obstacles make operations arduous. Government-mandated price controls on essential drugs, coupled with subpar healthcare infrastructure and a fragmented distribution network, further deter sustainable investment.

Business environment in Nigeria causes various hurdles.

Currency fluctuations and foreign exchange scarcity add layers of complexity, hindering profit repatriation and raw material imports. Inadequate infrastructure, including unreliable power supply, security concerns, and deficient transportation networks, contribute to increased costs and inefficiencies. Policy inconsistencies across different administrations create uncertainty, hampering long-term planning and foreign investment. These challenges collectively drive pharmaceutical companies towards more favourable business environments abroad. The repercussions of this exodus extend beyond economic concerns to the healthcare sector. Reduced availability of essential medicines, increased reliance on imported drugs, and escalating healthcare costs pose immediate threats to public health. Job losses resulting from company closures further disrupt the economy and erode expertise within the pharmaceutical sector.

The absence of major pharmaceutical players weakens healthcare infrastructure, stifles innovation, and undermines the country’s ability to tackle health challenges effectively. However, strategic interventions can reverse this trend and revitalize Nigeria’s pharmaceutical industry. The government must prioritize policy consistency, implement reforms to attract and retain pharmaceutical companies, and invest in healthcare infrastructure. Modernizing hospitals, clinics, and research facilities while enhancing transportation and logistics networks will create an enabling environment for pharmaceutical operations.

Related Article: Local production of pharmaceutical supplies

Supporting research and development, facilitating technology transfers, and reducing import dependence are critical steps towards retaining local drug production. Strengthening regulatory frameworks, combating counterfeit drugs, and investing in healthcare professional training will enhance the sector’s overall capacity. Collaboration with international organizations and stakeholders is essential to maintaining global health standards. Strengthening health insurance schemes will ensure universal access to affordable healthcare services and medications, promoting a healthier population.

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