Can Nigeria’s manufacturing, pharmaceutical industry compete? (2) – Prof.Soludo
The former Central Bank governor, Prof. Charles Soludo in a recent forum organised by Nigeria Association of Industrial Pharmacists (NAIP) in Lagos, has questioned the ability of Nigeria’s manufacturing and pharmaceutical industry to compete in the global market with certain indices pointing to that direction.
As I review the global industry, the structural shifts and market trends, I do not have good news for the audience here. I refer specifically to the pharmaceutical manufacturers among your membership. As of today, Nigeria has neither a comparative nor a competitive advantage in pharmaceuticals.
(To deliberately create a competitive advantage will require serious strategizing and effort). On cost considerations, Nigerian firms cannot compete: the risk-adjusted rate of return on investment in the industry is comparatively very low. It is not surprising that the global majors in the industry are not pouring in capital. Estimated at about US$l,billion (less than 0.5% of Nigeria’s GDP and basically the size of a medium-sized pharmaceutical company abroad) the share of Nigeria’s, pharmaceutical industry in the global industry is basically zero.
Local manufacfure has been consistently losing market shares in the local market let alone being competitive in the international market. I understand that todate, none of the pharmaceutical companies in Nigeria is WHO- certified. If you adjust for the outsourced production to foreign firms, the 100 or so largely small and fragmented companies in the industry account for about 20% of domestic drug consumption.
It is a struggling industry. Some of the existing firms have resorted to a number of ‘survivalist strategies’ by joining the ‘trading train – as marketers for foreign firms or have outsourced their production to Indian and Chinese manufacturers while, they are more amply rewarded as happy importers. I will not be surprised if out of your 300 corporate members, more than 60% are in the marketing/distribution segment.
I will not waste your time with a rehearsal of why and how the industry is not competitive. You probably have a better list of the reasons. The bottomline is that it is subject to the same competitive disadvantages as the productive sector especially manufacturing.
The industry cannot withstand the drug armada from China and India in particular – which have by far better cost advantages – and you cannot stop them from coming given our obligations under the General Agreement on Trade and Tariffs (GATT) and the World Trade Organization (WTO). Some of you complain that the industry is a victim of unfair trade (characterized by inflow of fake, illegal, substandard drugs or even ‘dumping’) while the government does little to ‘protect’ or patronize the industry.
Some demand for special, cheaper funds for pharmaceuticals production. The list is long. I will argue that some of the proposals, if implemented, will merely act as short to medium term palliatives. In your language, administering only pain killers to a patient with malaria will not make him well.
Where do we go from here?
Some analysts believe that the national development discourse is saddled with creeping analysis paralysis.
Philosophers, it is said, have interpreted the world: the problem is to change it! As I review the National Economic Empowerment and Development Strategy – NEEDS – or its revised version in the name of Vision 2020 document, the various ‘conclusions’ of the annual Nigerian Economic Summit, and the sundry ‘blueprints’ f1ying around you almost come to the conclusion that the missing link is a focused execution capacity.
