Pharmaceutical manufacturers in Nigeria are facing significant financial setbacks, with estimated losses amounting to eight percent of their revenues due to the Federal Government’s delayed implementation of its zero-Value Added Tax (VAT) policy. This policy was designed to alleviate the financial burden associated with importing raw materials necessary for pharmaceutical production. Chairman of the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), Oluwatosin Jolayemi, expressed frustration over the situation, stating that manufacturers still have not reaped the benefits of the intended relief. With duties on imported pharmaceutical raw materials still being a pressing issue, Jolayemi highlighted the need for an effective implementation protocol from the government, without which the executive order remains ineffective and unenforceable.
Compounding the industry’s difficulties, bureaucratic delays have stalled the adoption of the executive order by the Nigerian Customs Service (NCS). Jolayemi emphasized the necessity of coordination between various government entities for the policy to take effect. The process requires communication and action between the Ministry of Finance, the Comptroller-General of Customs, and their respective commands—complicated bureaucratic processes that further delay needed changes. Jolayemi voiced his concerns, questioning how long it would take to establish the necessary implementation guidelines and further communications, lamenting the current status of the industry. As a result of the anticipated yet unfulfilled benefits, manufacturers have been compelled to lower prices, adding to the distress within the sector.
The current landscape of the pharmaceutical manufacturing sector is reportedly worse than prior to the announcement of the executive order. The market has misconceptions regarding the actual status of import duties and VAT, leading distributors to pressure manufacturers into reducing prices based on the false assumption that they are already benefiting from zero tax status. Jolayemi’s observations reveal that manufacturers feel cornered, experiencing a decline in margins as market expectations ignore the realities of the delays in policy implementation. Instead of reaping profits from reduced costs associated with the zero VAT policy, manufacturers find themselves in a structurally disadvantaged position that jeopardizes their financial stability.
In addition to the implications of delayed VAT implementation, rising operational costs have placed further strain on pharmaceutical manufacturers. The surge in costs, particularly electricity tariffs and foreign exchange rates, has drastically increased the cost of production. As Jolayemi highlighted, electricity costs have skyrocketed from an already high range of N7-8 million to approximately N42 million monthly. These additional financial burdens are resulting in an overall loss of between seven to eight percent for manufacturers, further complicating their ability to maintain competitiveness in a precarious economic landscape.
The ramifications of this situation extend beyond the manufacturers to affect Nigeria’s healthcare sector, where many essential medicines have become either unaffordable or unavailable, significantly impacting supply to hospitals and clinics. Jolayemi voiced the need for the Federal Government to prioritize the pharmaceutical industry, underscoring its critical role in the nation’s health and productivity. A healthy population is essential for national prosperity, and the pharmaceutical sector is instrumental in providing the necessary medications that facilitate recovery and well-being. He warned that without adequate medication, even well-structured healthcare facilities would struggle to serve the public effectively.
Moreover, Jolayemi stressed the urgency of open dialogue between pharmaceutical industry stakeholders and government entities, including the National Agency for Food and Drug Administration and Control, and the Federal Ministry of Health. He argued that a collaborative approach would enable the government to fully understand the challenges faced by the industry and develop targeted solutions. Jolayemi’s final plea reflects the acute sense of urgency regarding the implementation timeline, insisting that the two-year grace period for the zero VAT policy should commence from the date it is actively implemented, rather than from the date of its announcement. With the executive order having been delivered by President Bola Tinubu on June 28, 2024, and the recent progress reported by the Ministry of Health, manufacturers and healthcare providers alike hope that concrete steps will soon follow to remedy the ongoing crisis.
