November 26, (THEWILL) The announcement in August this year by pharmaceutical mammoth GlaxoSmithKline (GSK) terminating over 50 years of operations in Nigeria has spotlighted the rapidly decaying state of healthcare and domestic manufacturing in the country.
GSK declared that a restrictive climate of policy unpredictability, forex troubles and supply chain instabilities has made continued investments in local production unfeasible, forcing a switch to an import-dependent distribution model.
Sanofi, the French pharmaceutical multinational, has also disclosed its plan to cease manufacturing and operations in the country next year for similar reasons.
This mirrors a wider exodus plaguing Nigeria’s manufacturing landscape.
The exit of the healthcare multinational giants will not only threaten major disruptions in the supply of essential medicines but also further expose the economy to external shocks. More importantly, it is a stern indictment of the Federal Government’s long failure to institute impactful reforms and confront the binding constraints strangulating industrial growth.
GSK began operating in Nigeria in 1971 and it invested significantly in local manufacturing, with production facilities in the country accounting for over 40 per cent of its revenues in West Africa. Its brands, including Amoxil, Augmentin, Panadol, Andrews Liver Salt, Horlicks, Sensodyne, Macleans, Voltaren, and Otrivin, spread across therapeutic categories, were household names. Its departure leaves a gaping hole in terms of investments, availability of high-quality yet affordable essential drugs and national self-reliance in healthcare.
The company directly attributed its decision to challenging operating dynamics, including excessive barriers to importing critical raw materials, inability to access foreign exchange for vital transactions and unpredictable trade policies – issues that have chronically plagued Nigeria’s manufacturing landscape.
Operational conditions have deteriorated to a point where multinationals can no longer justify further investments. The departure of such anchors lowers overall sector attractiveness and investments, while stretching the supply chains of indispensable medicines.
Nigeria has already witnessed an alarming exodus of manufacturers, including industrial giants like Michelin, Dunlop and several other entities spanning steel, textiles and consumer goods over the past decades. Other recent notable exits include Mayor Biscuits Company Limited, Louis Carter Industries, Moak Enterprises, Tower Aluminium, Technoflex Company Limited, Evans Medicals and Multi-Trex Integrated Foods Plc.
Their closures were influenced by a tough macroeconomic environment characterised by issues, such as foreign exchange scarcity, poor infrastructure, security concerns, port congestion, policy uncertainties and multiple taxation.
High production expenses from energy costs to borrowing rates, alongside forex troubles and broken infrastructure, have made Nigeria wholly uncompetitive. Complex clearance procedures, high duties and corrupt practices at ports also hike costs. Insecurity raises risks and costs of distribution. Lower local patronage due to a shrinking consumer market further dampens viability. Poor road networks put the final nail in the coffin.
Successive governments have failed at reforms to improve the ease of doing business whilst boosting domestic capabilities in a globalised economy. Nigeria performs abysmally on global competitiveness rankings. Sub-optimal policies have created a hostile landscape, making continued local operations and fresh investments unattractive. This de-industrialisation leaves the economy dangerously reliant on imports, even for basic items.
The ramifications of GSK’s exit on domestic pharma production are also worrying. Nigeria’s healthcare sector depends almost wholly on importation with over 70 per cent of utilised drugs produced overseas. Meanwhile, existing manufacturers operate at a meagre 20 per cent capacity.
Rising populations and disease burdens require an estimated 100 per cent increase in local production in the immediate future. However, manufacturing firms at home struggle with similar dilemmas of foreign players while battling additional headaches of counterfeiting that rob potential revenues.
Poor policy formulation and coordination between regulators stymie growth. Capacity deficits also hinder compliance to international standards, blocking access to export markets that could bolster profitability. Lack of financing options to upgrade production lines also forces dependence on imports.
With GSK’s exit, the few remaining manufacturers may be hard-pressed to address local needs, especially for specialised drugs. Distributors of the multinational’s brands are already exploiting monopolies to raise prices by over 100 per cent in a country where over 70 million already lack adequate access to essential medicines due to unaffordability.
Nigeria already faces frightening health statistics with one of the worst public health outcomes globally. With a population of over 200 million, shortages or price hikes for essential medicines could trigger catastrophic public health crises. Learning no lessons from the crippling fuel and cash shortages still haunting Nigerians, those occupying Nigeria’s corridors of power continue gambling with critical supply chains that undergird national wellbeing.
Meanwhile, ruinous out-of-pocket spending already drives over 40 per cent of Nigerians into poverty yearly. An over-reliance on imported medicines would exacerbate foreign exchange pressures in a country still struggling to manage its balance of payments crisis.
Additionally, the government’s spending priorities appear disconnected from the healthcare and economic crisis facing average Nigerians. Instances of extravagant spending on luxury vehicles, mansions and lavish foreign trips by political office holders paint a picture of wastefulness and insensitivity to the needs of impoverished citizens lacking basic medicines.
Reports of inflated contracts and white elephant projects further highlight apparent fiscal recklessness and deficiencies in resource allocation by political leaders far removed from the harsh realities facing average Nigerians. With craning healthcare challenges, the government needs to demonstrate greater urgency and efficiency in utilising limited public resources to serve the medical needs of millions of vulnerable citizens.
Healthcare security forms a vital pillar of national security. Thus, an import-dependent system prone to external vulnerabilities is unsafe for the country. Already battling high disease burdens from malaria to infant mortality, the country can ill-afford more spikes in morbidity and mortality should drugs become inaccessible if policies remain on the current trajectory.
The underdevelopment of domestic manufacturing in favour of imports has left the country’s healthcare system prone to external shocks, while citizens face shortages and prohibitive costs for critical medicines. However, Nigeria could convert GSK’s exit into an opportunity that spurs major improvements.
With 25 per cent of its population in need of essential drugs yearly, developing robust domestic capabilities is indispensable for Nigeria. The country is too large to surrender its pharmaceutical future to the whims of external actors over which it has no control.
The government must institute policies that eliminate constraints to active pharmaceutical ingredients importation whilst incentivising investments in local medicine production through tax rebates and financing schemes. Stringent penalties for substandard medicines must also be enforced to foster confidence in locally produced options.
Secondly, drug manufacturing clusters providing shared production facilities and reliable infrastructure at subsidised costs can lower barriers for new entrants and smaller players. Positioning Nigeria as a West African pharma-hub through such enablers could attract investment by companies seeking regional export bases. Workforce productivity can also be boosted through industry collaborations with academia in technical and vocational training.
Most importantly, significant bottlenecks for manufacturing like credit access, forex, infrastructure, regulations and security must be urgently addressed using well-researched strategies for enduring improvements. Getting the fundamentals right would rebuild investor confidence in Nigeria’s economy.
Healthcare self-reliance requires the political will to implement unpopular but necessary reforms. The current administration at federal and state levels must move from rhetoric to expedient action in fixing the national manufacturing ecosystem while fostering import-substitution policies in the health sector. Nigeria’s future is at stake!
The GSK case reveals how fragile the healthcare sector has become after years of neglect and policy missteps. Its exit may presage the eventual collapse of local production without emergency action. Nigerian lives already hang by a thread from daily incidents of preventable deaths. The government must institute supportive policies for domestic manufacturing to avert the looming drug security crisis whilst safeguarding the health of millions relying on affordable essential medicines.
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