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Pharmaceutical Manufacturers Decry High Interest Rates, Say Crippling Businesses

Nigerian pharmaceutical manufacturers have raised the alarm over the debilitating impact of soaring interest rates on operation, claiming it is hampering growth and threatening the industry’s survival.

They lamented that the high interest rates, which had reached 38 per cent, have become a critical barrier to operational sustainability.

Speaking at the 13th Annual Symposium and Award Ceremony, organised by the Health Writers Association of Nigeria, in Lagos, the manufacturers stressed that the situation has made operation impossible, urging the government to lower the rates to 20 per cent or less.

They argued that the government’s focus on fighting inflation through high interest rates is hurting the economy and that the government should prioritise growth instead.

The Chairman of ST. RACHEAL’S Pharmaceutical Nigeria Limited, Akinjide Adeosun said Multinational corporations like GSK, Sanofi, and others have lately left Nigeria, and their departure has left a vacuum in the country.

According to Adesosun, operating in Nigeria has proven to be extremely tough for these pharmaceutical businesses due to a demanding economic environment that includes variable exchange rates, hefty import levies, stringent regulatory processes, and bureaucratic impediments.

He said it is no longer sustainable for the federal government, through the Central Bank of Nigeria to steadily raise the MPR as a way to reduce the high rate of inflation.

He urged the government to focus on growth rather than inflation.

“The strategy of the federal government has been to increase MPR. Recall that inflation is when you have fewer goods being chased by plenty of money, and when that happens, you will have an increase in the prices of goods. It is a global norm that when you want to stem inflation, you must increase MPR, because once you increase MPR, lending increases, thereby mopping up excess money in circulation.

“No doubt, the governor of CBN, Olayemi Cardoso is doing an excellent job since he came on board because he has been able to use monetary tools to be able to manage the economy. If he hadn’t done what he is doing around monetary policy, probably, Nigeria would have been in a dire situation by now.

“However, after trying this for a year, and inflation is still high; the lending rate is also high, it is time to switch gears. When you borrow money at an interest rate of about 38 per cent to import drugs into the country, coupled with the high cost of fuel/diesel, clearing cost, import duties and levy duties (as not all drugs attract zero per cent Import duties may be zero per cent, but the levy is about 20 per cent), no business can survive.

“CBN has been increasing MPR for about a year, without any concrete result. It is now time to leave inflation alone and start chasing growth. You cannot chase growth, if manufacturers cannot borrow at a single digit,” he explained.

To tackle insecurity in the country, the chairman tasked the federal government to recall and deploy retired security personnel (Police, DSS & Military) to the wards in local government areas to assist in curtailing insecurity, as it will help boost food production.

He said, “Government should provide grants (not loans) to businesses. The government should consider selling nonperforming assets to generate foreign exchange. (E.g. Federal Secretariat & Nitel buildings in Lagos). I encourage FIRS to focus on only eight tax types accounting for 90 per cent of tax revenue and delete 54 tax types which are ‘impediments to business growth.

“In addition, small taxpayers with businesses with an annual turnover of less than N1billion should be given a Tax Holiday for one year. Medium to large taxpayers should have a corporate income tax (CIT) reduced from 30 per cent to 20 per cent to help cushion the shock of the operating environment. Import duty and import levy should be deleted to enhance the survival of the pharmaceutical sector. If these strategies are executed, we can turn the difficulty of stagflation into the superhighway road that will lead us into economic prosperity.”

Adeosun also urged company owners to diversify if they want their companies to thrive.

“Outsource non-essential parts of your business and focus on your core business. You may consider per hour or per day wage to improve productivity. Consider installing Solar panels (Expensive near term but affordable long term). This clean energy helps to preserve our ecosystem,” he advised.

On his part, the National Chairman of the Association of Community Pharmacists of Nigeria, Adewale Oladigbolu said the pharmaceutical sector is depressed.

“This industry affects everything we do as a country since a healthy population is productive and contributes to economic prosperity,” he added.

Oladigbolu said the pharmaceutical industry has a funding gap of billions of naira, adding, “We don’t have enough capital to operate. We don’t also have enough facilities in Nigeria to produce drugs locally.

The pharmacist added, “It is important that the government come in heavily. The same kind of interventions seen in the petroleum industry should be done in the pharmaceutical sector. We need the government to give grants to the industry. The government has great intentions to transform the industry, but those intentions have not been translated into practical means. It is time for government to take action, by fulfilling its promises to the industry.”

SOURCE: HealthWise