Pharmaceutical industry and national development
This 89th National Conference of the Pharmaceutical Society of Nigeria (PSN) is happening at a most critical time in the nation with the Nigerian economy in a recession characterised by the decline in the official naira exchange rate by more than 55% over the last one year. In the parallel market, we see an even more significant decline in the exchange rate at more than 90% over the same period. While the government would wish otherwise, the fact is that most Nigerians and their businesses unless they are well connected, they cannot source foreign exchange for their business in the official market.
For the Nigerian pharmaceutical industry that is virtually import-dependent from raw materials to finished products, negative exchange rate movement at the quantum we have seen has meant skyrocketing prices for pharmaceutical products for those who could source forex. It has also meant reduced capacity utilisation for the pharmaceutical companies who are unable to source foreign exchange for their raw materials.
On the demand side, it implies expensive medicines for the Nigerian people, far above their means and the rationalisation or the contraction of demand from retail to wholesale and the factory gates. Indeed, the Pharmaceutical Society of Nigeria (PSN) has issued a rallying cry to the government for some form of preferential treatment for pharmaceutical imports given public health implications.
The challenge however for the Nigerian state is that it has to contend with other diverse priority and preferential sectors such as petrol imports and cannot satisfy their forex demand at current prices. I believe as argued in my earlier economic paper titled, “Government must let markets work” published in leading Nigerian newspapers that markets are the most efficient ways to allocate and price scarce resources.
Attempts to undo the market, even with patriotic intentions, as we have seen with petroleum product markets create price distortions; dis-incentivize private provision to complement public supply, that which is critical in a period of fiscal constraints. It creates a parallel, rent-seeking market for the privileged few to make undeserved profits.
The government must stay committed to flexible, market-driven exchange rate policy, ensure effective co-ordination of fiscal and monetary policies and deploy political sagacity in the Niger Delta, to contain militancy and get oil production to recover back to 2 million barrels a day from current 1.4million barrels. At current oil prices of fifty dollars over the coming period, in addition to a market-driven exchange rate that eliminates speculation premium and distortion, we should see private capital flows of forex returning. This along with higher government revenue at fifty-dollar oil price and increased oil production should improve foreign exchange supply and ultimately help the naira with the wide positive spirals across the economy.
The current situation however, calls for a deeper reflection on how we would build and develop a pharmaceutical industry that is increasingly less import dependent, and by so doing can absorb the shocks of foreign exchange volatility, which is inevitable in the boom, and bursts of global economic cycles. In discussing the pharmaceutical industry contribution to national development, this paper would be more forward looking on contemporary industry and practice issues while recognising where the industry is coming from. How do we build a pharmaceutical industry that is competitive, at least in some areas of the pharma industry value chain; and become a critical local player in addressing the health needs of our people while also dominating the exports market in the West Africa? Professor Charles Soludo in his lecture titled “Can Nigeria Manufacturing and Pharmaceutical Industry Compete” at the Nigeria Association of Industrial Pharmacists Conference six years ago, in September 2001 x-rayed these issues. The summary of Professor Soludo’s argument, which I extend further, are as follows
The pharmaceutical industry competitiveness cannot be divorced from the competitiveness of the overall manufacturing sector and the Nigerian economy. Nigeria has consistently ranked near the bottom on international competitiveness ratings such as the recent World Bank’s Ease Doing Business (released last month) where Nigeria ranked 169th out of 190 countries, the World Economic Forum’s Global Competitiveness Index (GCI) also released last month where Nigeria dropped 3 places to 127th out of 138 countries and was only better than countries like Serria Leone and Malawi, Mo Ibrahim’s Africa governance index (36th out of 54 countries), Transparency International’s corruption perception index (136th) , UN’s Human Development Index , Failed State Index where Nigeria is in the top 15 of the most fragile states in the world.
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