In a landmark move to reduce the high costs of producing essential medical supplies locally, President Bola Tinubu has signed an executive order suspending import duties and value-added tax (VAT) on crucial medical imports. This initiative aims to revolutionize Nigeria’s pharmaceutical and medical device industries, enhancing local manufacturing and decreasing dependence on imported medical products.
Announced by Prof. Muhammad Ali Pate, the Minister of Health and Social Welfare, the executive order seeks to alleviate the financial burden on local manufacturers of pharmaceuticals, diagnostics, and medical devices. Prof. Pate highlighted that the Minister of Justice and Attorney General of the Federation would take steps to codify the new order. “This order is pivotal to the success of the Initiative for Unlocking the Health Care Value Chain, approved by the President in October 2023,” Pate stated. “It introduces zero tariffs, excise duties, and VAT on specified machinery, equipment, and raw materials, aiming to reduce production costs and enhance our local manufacturers’ competitiveness.”
Key Components of the Order
The executive order targets a range of essential items for the manufacturing of health products. These include active pharmaceutical ingredients (APIs), excipients, and other crucial raw materials necessary for producing drugs, syringes, needles, long-lasting insecticidal nets, and rapid diagnostic kits. In addition to tax and duty exemptions, the order establishes market-shaping mechanisms such as framework contracts and volume guarantees to encourage local manufacturers. These mechanisms are designed to provide stability and predictability, fostering an environment conducive to investment and growth in the healthcare sector.
The order mandates collaboration between the Ministers of Health, Finance, and Industry, Trade, and Investment to develop a harmonized implementation framework. This collaborative effort aims to expedite regulatory approvals and reduce bureaucratic bottlenecks that have historically hampered progress in the healthcare industry. Key agencies, including the Nigeria Customs Service, National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organisation of Nigeria, and Federal Inland Revenue Service, will ensure swift implementation. Special waivers and exemptions under this order will be effective for two years, providing a critical window for local manufacturers to establish and expand their operations.
Economic and Industrial Benefits
“The implication of this order is a pivot towards market-based incentives to encourage medical industrialization,” Pate explained. “It aims to reduce the costs of medical products through import substitution over time, create and retain economic value, and enable job creation in the healthcare value chain.”
By lowering the financial barriers to local production, the executive order is expected to drive significant economic benefits, including increased job opportunities and the retention of economic value within the country. It also positions Nigeria to become more self-sufficient in producing essential medical supplies, reducing dependency on international markets, and improving the resilience of the healthcare system.
As Nigeria moves forward with this ambitious plan, the focus will be on ensuring effective implementation and maximizing the benefits of the new policies. The government’s commitment to continuous improvement and innovation in the healthcare sector is evident, and this executive order marks a significant milestone in the journey towards a more robust and self-reliant healthcare system. President Tinubu’s executive order not only addresses immediate challenges but also lays the foundation for long-term growth and sustainability in Nigeria’s healthcare sector. By prioritizing local manufacturing and reducing costs, this initiative promises to enhance the overall healthcare landscape, ensuring better access to medical supplies and improving health outcomes for all Nigerians.
Commendations Galore
President Tinubu’s recent executive order to suspend import duties and VAT on essential medical supplies has garnered widespread praise, particularly from stakeholders in the healthcare sector. Among the commendations is that from Adewale Oladigbolu, the National Chairman of the Association of Community Pharmacists of Nigeria (ACPN), who hailed the order as a significant step in the right direction.
Oladigbolu highlighted the potential benefits of the executive order, noting its promise to alleviate the high costs associated with locally producing pharmaceuticals, diagnostics, and medical devices. “This is a welcome development and a step in the right direction,” he said, reflecting the general sentiment of optimism within the pharmaceutical community. Despite his praise, Oladigbolu expressed concerns about the sustainability of the two-year limit set for the tax and duty exemptions. He pointed out that the implementation process, combined with the months required for shipping, could significantly reduce the effective period of the order. “By the time the order is fully implemented, and considering the shipping duration, it might expire, leading to a return to the status quo,” Oladigbolu warned.
To ensure the long-term success of this initiative, Oladigbolu called on the Federal Government to offer additional support to the pharmaceutical industry. He advocated for grants to help local pharmaceutical companies grow and suggested closing down the open drug market to ensure a more regulated and supportive environment for legitimate businesses. “Offering grants to pharmaceutical industries and shutting down the open drug market are crucial steps to ensure growth in the sector,” he emphasized.
The Nigeria Employers Consultative Association (NECA) has also praised the new executive order eliminating tariffs, excise duties, and VAT on pharmaceutical raw materials, machinery, and equipment. NECA’s Director-General, Mr. Adewale-Smatt Oyerinde, emphasized the potential of this order to rejuvenate the struggling pharmaceutical sector and urged for its prompt and effective implementation.
In a statement, Mr. Oyerinde highlighted the significance of the executive order, noting its potential to alleviate the severe cost challenges faced by the pharmaceutical industry. “This sector can now breathe,” he said, underscoring the relief the order brings. He called for a swift execution of the order to provide immediate relief from the current cost pressures and allow the sector to rebound. According to NECA, the executive order introduces zero tariffs, excise duties, and VAT on specific pharmaceutical raw materials and specialized machinery. This move is expected to boost the production of essential healthcare products in the economy. NECA explained, “The executive order comes at a time when local pharmaceutical companies are grappling with an acute shortage of productive raw materials, high production costs, and low output due to the high cost of importing productive machinery and other input materials.”
Mr. Oyerinde noted that about 50 percent of raw materials used in the pharmaceutical sector are imported. The high cost of these imports, exacerbated by the depreciation of the Naira and associated clearing charges, has significantly inflated production costs and pharmaceutical product prices. This has led to increased inventories of unsold goods and a minimal contribution to the GDP. According to the National Bureau of Statistics (NBS), the sector contributed only 0.25 percent and 0.26 percent to real GDP in 2022 and 2023, respectively, while the inventory of unsold pharmaceutical products stood at N79 billion in 2022.
Mr. Oyerinde stressed the importance of timely and thorough implementation of the executive order to avoid the pitfalls that have plagued previous orders. “Deft monitoring and engagement with stakeholders are crucial to ensuring the successful implementation of the order,” he said. “We hope that greater efforts will be put into making this new order work for the benefit of the industry and Nigerians in general.”
NECA’s commendation of President Tinubu’s executive order reflects the association’s optimism about the potential benefits for the pharmaceutical sector. The prompt and efficient implementation of this order could mark a turning point, providing much-needed relief and paving the way for a more robust and competitive local pharmaceutical industry. As the sector looks forward to these changes, the focus will remain on ensuring that the order is executed effectively, bringing about the intended economic and health benefits for Nigeria. As the healthcare sector rallies behind President Tinubu’s executive order, the focus will be on addressing the concerns raised and ensuring effective and timely implementation. The potential for this order to transform the pharmaceutical landscape in Nigeria is significant, but it will require sustained support and strategic planning to achieve lasting impact. By addressing the challenges and building on the momentum of this executive order, Nigeria can look forward to a more robust and self-sufficient healthcare system, ultimately improving health outcomes for its population.
