By Nume Ekeghe and Dike Onwuamaeze
Pharmaceutical firms and members of the Pharmaceutical Society of Nigeria (PSN) have described the N100 billion single digit interest rate intervention fund from the Central Bank of Nigeria (CBN) as a major development that would significantly boost the manufacturing capacity of firms in the industry, which would have been difficult to realise with financing from commercial banks.
The President of the PSN, Mr. Sam Ohuabunwa, who spoke at the Financial Correspondent Association of Nigeria (FICAN) capacity building forum in Lagos, yesterday, said the fund would go a long way in enhancing capacity in the Nigerian pharmaceutical industry and enable firms in the sector to build or complete new plants, acquire new equipment and machinery, commence new processes of production that would expand their manufacturing and increase add on and value addition.
“The major thing,” according to Ohuabunwa, “is that the fund will lead to increased output and ensure that local production contributed more to the country’s pharmaceutical needs.
He said: “First, it is something we have prayed for. It is something that we have cried for. It is something that we have advocated and made case for many years ago that we needed special funding. We have even demanded the Pharmaceutical Industry Bank. So, we are happy that at last, thanks to COVID-19, that the federal government through the CBN has eventually come to our aid. For us the N100 billion was a major response from the government through the CBN.”
He also said, operators in the industry have started to access and apply the funds to their businesses according to their individual needs.
“I am aware that many of those who applied in the first tier have received approvals and have accessed the funds through their corresponding commercial banks.
“A couple of them have started to apply them to affect what they needed it for capacity building, or building or starting new plants. Getting new equipment and starting new processes to expand their manufacturing and increasing add on and value addition. This shut in the arm from the CBN is supposed to boost that and we are eager to see it happen.”
However, the members of the PSN pointed out that the current scarcity of foreign exchange in the country is undermining their ability to utilise the loan for their businesses and may affect their ability to repay as at when due.
Ohuabunwa pointed out that inflation and depreciation of the naira exchange rate are major challenges to proper utilisation of the fund in a manner that would enable its beneficiaries generate the cash flow to repay the loan.
He said: “But feedback from those that have accessed the loans showed that they are having difficulties in converting the money into raw materials because of the shortage of foreign exchange. Many of them are running the risk of losing a substantial value of this money to inflation and high level of depreciation of the Naira in the foreign exchange market and are being constrained to shop for foreign exchange from the parallel market.”
He also disclosed that the PSN has sent a special request to the CBN to make a special provision for the pharmaceutical industries and other healthcare players to be able to access their foreign exchange needs directly from the apex bank.
“This is a special project and the CBN should not allow the firms to go through the torture of begging commercial banks or looking for where to scratch out foreign exchange.
It is not just good. Anything worth doing is worth doing well,” Ohuabunwa said, adding that “from my own point of view it is the foreign exchange aspect that is presenting the major chunk of the problem of efficiently appropriating the fund.”
He, however, noted that the PSN has received a verbal assurance that the CBN would look into their demand.
“We appeal to CBN to make a special allocation to beneficiaries of this fund to be able to import inputs. We have only received their verbal assurance to do something. We will also, be asking for the extension of the moratorium from one year to two years and reducing the rate which is still reasonable at single digit,” he said.
Speaking in the same vein, the Chairman of the Pharmaceutical Sector of the Manufacturers Association of Nigeria, Mr. Fidelis Ayebae, who also spoke during the workshop, said 15 firms in the industry have accessed the fund through their corresponding commercial banks while the second batch of applications from 20 firms was being processed by the CBN.
Ayebae, who is also the Managing Director of Fidson Healthcare Plc, noted that the intervention came with a soothing balm because “there is no way we would be profitable by borrowing at between 25 and 30 per cent from the commercial banks.”
He said: “The window that CBN gave is nine months for people to access this fund. I have accessed it as the managing director and promoter of the Fidson Plc and I am sure that over time everybody that applied will access it given that the fund is real and that the CBN is indeed eager to assist the Nigerian industry to contribute their quota to nation-building.”
Ayebae also stated emphatically that the Nigerian pharmaceutical industry is not ready for the commencement of the African Continental Free Trade Area (AfCFTA) agreement for lack of competitive edge. “From my perspective as a pharmaceutical manufacturer, we are not ready.
I am not speaking for other industries. I am speaking for the pharmaceutical industry only.
“The arithmetic does not add up. If the AfCFTA is not properly managed it could rubbish industries in Nigeria that are bedeviled with inadequacies in infrastructure. So, from the pharmaceutical perspective, we are not ready. The rule of origin is where other countries are going to kill us because we do not have the mechanism to monitor what they are doing.
I don’t know how Africa has bought into these things that are not helpful to us simply because we want to belong,” he said.
Ayebae also acknowledged that those who had accessed the funds were facing the challenge of foreign exchange scarcity.
He, however, said that the CBN was managing within what is available to it to meet the needs of manufacturers.
“They cannot meet all of our needs. Do not forget that there are others that are demanding for the little available resources.”
He also bemoaned government policy summersault, especially the imposition of VAT on pharmaceutical industry that had been hitherto exempted, as one of the nagging challenges facing the industry.
“But three months ago somebody woke up in FIRS and announced that raw materials and packaging materials, which are primary inputs for the manufacture of pharmaceutical products, will now be VAT compliant.
“But this VAT is not applicable to imported finished pharmaceutical products. There are too many policy summersaults that are not helping the industry. If we must provide jobs to young Nigerians and enable them to practice what they studied, then manufacturing is the quickest way to do so and develop the nation,” Ayebae said.