Browse the complete Report on: Nigeria Pharmaceuticals and Healthcare Report Q4 2010
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Pharmaceutical firms have long regarded Nigeria with interest, chiefly because of its massive middleclass population and rising GDP, although we caution that much of that GDP depends on oil revenues. Current plans for 10% of oil revenues to be directed at developing the Niger Delta region could be revised downwards if the president calls for electoral reform and remains the incumbent. This could escalate tensions between the north and south of the country - with the north wanting a larger share of the revenues - and raise risks for pharmaceutical firms looking for a Nigerian base.

BMI identifies a number of key risks for pharmaceutical sector development in Nigeria: the weak regulatory environment; large numbers of counterfeit drugs; sporadic law enforcement for shutting down illegal pharmacies; low per-capita spending on medicines (although this is to be expected); supply chain issues; power generation and supply; and high unemployment and therefore a limited skilled workforce, among others. Infrastructure is also a key shortcoming in the Nigerian market. Most infrastructure investments have focused on transport and power generation, as when power stations are operating, there are frequent outages. For pharmaceutical firms with heavy energy demands, this means investment in separate generators to prevent losses during production. In its Q410 Business Environment Ratings, BMI gives Nigeria a total score of 35.8 out of 100. Against a selection of regional peers, it ranks below Ghana, but otherwise is generally in line with expectations.

The population is expected to reach 166mn by 2014, while real GDP growth will continue just above 7% for the next five years. Unemployment is set to remain high, and will be 14.6% of the total labour force by 2014, although this is on a slow downward trend. High unemployment points to lower purchasing power, which means that we estimate per-capita spending on pharmaceuticals at a meagre US$4 in 2009, rising to US$8.3 by 2014. This is a marginal improvement, but indicates serious underlying irregularities in income distribution, particularly from the key oil sector.

On the upside, low drug spending by a large population is still attractive to drugmakers, particularly those with generic medicines and essential over-the-counter (OTC) drugs. The latter is significant - analgesic OTC drugs feature heavily in terms of sales volumes and BMI believes spending in this segment will continue to be just under one-fifth of total pharmaceutical spending in Nigeria over the medium term. We also consider Nigeria to be very much in the stages of high essential medicine demand, which is a key reason for the OTC market comprising a generous proportion of all medicine expenditure.

Despite the risks, there are evidently opportunities - Canadian drugmaker Valuben Pharmaceutical has recently stated its interest in forming a public-private partnership with the Nigerian government in the Living Spring Pharmaceutical firm. Valuben's experience in establishing operations abroad has led the firm to prospect the country and the Nigerian firm, in turn, stands to benefit from knowledge transfer.
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Original Source : Market Research