Nigeria Pharmaceuticals and Healthcare Report Q2 2012

BMI View: As the most populous country on the African continent, Nigeria should be of interest to multinational drugmakers. However, extremely low per capita spending on medicines, rampant counterfeiting and government protectionist policies aiming to protect the domestic pharmaceutical industry will continue to pose high risks to potential investors. The situation may improve gradually over the forecast period if the government’s pledges for the improvement of intellectual property (IP) regimes and healthcare provision are realised and if the National Agency for Food and Drug Administration and Control (NAFDAC)’s clampdown on counterfeit drugs is sustained.
Headline Expenditure Projections
.. Pharmaceuticals: NGN142.84bn (US$917mn) in 2011 to NGN165.08bn (US$1.05bn) in 2012; +15.6% in local currency terms and +14. 3% in US dollar terms. Forecasts slightly up from Q112 due to macroeconomic factors.
.. Healthcare: NGN2,449bn (US$15.72bn) in 2011 to NGN2,887bn (US$18.33bn) in 2012; +17.9% in local currency terms and +16.6% in US dollar terms. Forecasts up from Q112 due to changes to historical data.
.. Medical devices: NGN29.98bn (US$192mn) in 2011 to NGN35.26bn (US$224mn) in 2012; +17.6% in local currency terms and +16.4% in US dollar terms. Forecasts up from Q112 due to changes to historical data and analyst intervention.
Risk / Reward Rating: Nigeria’s composite pharmaceutical RRR score for Q212 remains the same as in the previous quarter, at 38.1 out of the maximum 100 points. In the latest ranking for the Middle East and Africa (MEA) region, however, Nigeria occupies a slightly improved 24th position, out of the 30 countries surveyed. Nevertheless, Nigeria’s risks are very pronounced, with this component of the overall score expected to continue weighing heavily on the country’s regional placement.
Key Trends And Developments
• In November 2011, the National Agency for Food and Drug Administration and Control (NAFDAC) asked the government for an intervention fund of NGN200bn (US$1.23bn), according to Director General Paul Orhii’s statements reported by the local press. He said the fund would help the agency to efficiently perform its functions in the country. NAFDAC had also adopted a new system to help consumers to verify NAFDAC's certification of products, which should assist the fight against counterfeit medicines.
• Nigerian pharmaceutical company Greenlife Pharmaceuticals has introduced code numbers on drug packets as a method to curb counterfeiting, reported Daily Trust in October 2011. The move was made after the company found significant counterfeiting of its Lonart-DS anti-malaria tablets. The code on drug packs will enable customers to check whether the drug is genuine or counterfeit and assist in arresting distributors of illegal Lonart-DS tablets, according to the executive chairman of Greenlife Pharmaceuticals, Obiora Chukwuka.
• In late 2011, it was revealed that the USAID will invest about US$56.3mn to promote family planning and maternal healthcare in Nigeria. The money will be used through the Expanded Social Marketing Project In Nigeria (ESMPIN) to assist 15 states. The coordinator of the programme, Marty Bell, said the five-year project will enhance access to family planning and improve the availability of reproductive health and child health products.
BMI Economic View: Nigeria registered a sharp increase in its current account surplus, which rose to US$8.14bn in Q211, compared with US$4.73bn in Q111, according to the central bank. This is mainly attributed to an increase in exports and high global oil prices. However, Nigeria posted a drop in foreign direct investment to US$1.52bn in Q211, compared with US$1.88bn in Q111, partly due to security issues, although this was still above the US$1.50bn figure recorded in Q210. In the meantime, recent auction data suggest that the downward pressure on the naira may be easing, which should be of interest to foreign investors, especially as the government implements the new budget and tax incentives.
BMI Political View: Nigeria's 2012 budget, recently presented before the National Assembly by President Goodluck Jonathan, is an attempt to put greater emphasis on fiscal discipline and longer-term planning. While we believe the added emphasis on capital expenditures (particularly in the power industry and ports) and improvements to the business environment are steps in the right direction, some pressing questions remain, most notably about the ambiguity over fuel subsidies. Nevertheless, the government estimates that Nigeria needs NGN32trn (US$19.7bn) in capital investment over the next four years, of which it hopes to attract NGN13trn (US$8.0bn) from the private sector. To this end, the government has abolished duties on several types of machinery, introduced tax incentives, with further reforms to help the private sector in the pipeline. Additionally, public expenditures in some areas have been increased, with security, health, and education all mentioned as central to this strategy.