A new report by BMI, a Fitch Solutions subsidiary, warns that the naira could weaken to ₦1,993 against the U.S. dollar by 2028, posing severe challenges to Nigeria’s pharmaceutical and medical device industries.
The report, titled “Weak Naira and Structural Challenges to Constrain Nigeria’s Medical Devices Market Growth,” highlights the impact on Nigeria’s import-reliant medical sector, which depends on foreign sources for over 95% of its medical devices.
The report stated, “Continued weakness of the naira will increase medical device import costs and erode consumer purchasing power. Similar to other markets in sub-Saharan Africa, Nigeria heavily relies on medical device imports, with reliance of over 95 per cent.
“We expect that the naira will end 2028 at ₦1,993/$ from ₦306/$ in 2018. As the naira weakens, the cost of importing medical devices will continually increase, eroding both the health system and patient purchasing power especially to invest in essential medical technologies given underfunding of the public health sector.
“This would particularly affect high-cost demand for devices such as diagnostics, orthopaedics and dental products. On the export front, a weaker naira will enhance the competitiveness of locally manufactured medical devices, fostering growth in the sector.”
Despite the challenges, the report indicates a potential benefit in the form of increased competitiveness for locally produced medical devices due to a weaker naira.
However, local manufacturing still faces hurdles, including a shortage of skilled labor, outdated technology, and inadequate infrastructure, despite government incentives.
The administration of President Bola Tinubu has introduced measures to reduce these pressures.
In June 2024, an executive order was issued to lower medical service costs by removing tariffs, excise duties, and VAT on specific machinery, equipment, and raw materials, aiming to reduce production costs for local manufacturers.
BMI’s report also projects that Nigeria’s medical devices market could reach ₦171.1 billion (about £344.7 million) by 2028, driven by a growing population, focus on universal healthcare, and rising chronic disease burden.
The Nigerian economy is expected to recover by 2025, with a projected growth rate of 3.0% in 2024, up from 2.9% in 2023.
However, the sector’s growth could still be hampered by persistent challenges, including high inflation, tight monetary policy, and weak foreign investment.
As of Monday, November 11, 2024, Naijaonpoint observed that the naira was trading at ₦1,681.42 per dollar, slightly down 0.15% from Friday’s closing rate of ₦1,678.87.
During this period, FX turnover dropped sharply by 66.41%, from $1.4 billion on Friday to $471.5 million on Monday, reflecting decreased market activity.
The naira’s exchange rate reached a high of ₦1,695 and a low of ₦1,631 during this review period.