The Federal Government has signed an Executive Order that removes tariffs, excise duties, and VAT on certain pharmaceutical equipment and raw materials, effective for two years.
The order aims to encourage local production of pharmaceuticals, lower production costs, and reduce the prices of locally produced drugs.
In the last 13 months, there has been a steady and substantial increase in the costs of pharmaceutical products, medical services, dental services, paramedical services, and hospital services.
Health inflation has risen by 3.6 points from 20.5% in May 2023 to 24.1% in May 2024, leading to higher costs of general medical services.
One of the factors contributing to the rising cost of pharmaceutical products is the devaluation of the naira and fluctuations in the foreign exchange market.
First, Nigeria relies on foreign sources for medicines and vaccines, with imports accounting for 70% of local drug consumption.
Second, most of the Active Pharmaceutical Ingredients (APIs) and excipients required for domestic drug production are imported.
Consequently, the cost of drugs and medicine becomes susceptible to foreign exchange fluctuations.
In the same period, two multinational pharmaceutical companies, GlaxoSmithKline (GSK) and Sanofi-Aventis left Nigeria, contributing to the hike in the cost of drugs.
These circumstances suggest that drug prices may keep increasing unless local alternatives are provided.
In 2023, health inflation hit an all-time high, surpassing the levels seen in the past 13 years.
Health inflation moved from 9.3 in 2011 to 21.5 in 2023.
Besides the Executive Order which could potentially alter barriers currently impeding local pharmaceutical manufacturing in Nigeria, the Nigerian government has introduced a few other policies aimed at boosting local pharmaceutical production.