Naira May Fall to N1,993/$1, Increasing Healthcare Cost By 2028 – BMI Report

BMI, the research arm of Fitch Solutions, has projected a significant depreciation in Nigeria’s currency, forecasting that the naira could fall to N1,993 per US dollar by 2028.

This expected devaluation is poised to place substantial strain on Nigeria’s medical devices market, increasing costs for both importers and consumers within the sector. The findings are detailed in a report titled, “Weak Naira and Structural Challenges to Constrain Nigeria’s Medical Devices Market Growth,” which underscores how currency depreciation and structural economic challenges may hinder growth in the country’s healthcare sector.

The report explains that Nigeria’s healthcare market is heavily dependent on imports of medical devices, with more than 95% of the market relying on foreign supplies.

“We expect that the naira will end 2028 at N1,993/$ from N306/$ in 2018,” BMI’s report said, indicating an accelerated decline that could severely impact the affordability of medical equipment in Nigeria.

Commenting on the ripple effects, the report added, “Continued weakness of the naira will increase medical device import costs and erode consumer purchasing power,” especially for high-cost medical equipment like diagnostics, orthopedics, and dental tools.

This depreciation, BMI warns, could undermine both the health sector and the general public’s purchasing power to invest in essential medical technologies, especially given the limited funding in Nigeria’s public health sector.

Policy Interventions To Tame Rising Costs

President Bola Tinubu’s administration has attempted to mitigate these rising costs. In June 2024, Tinubu signed an executive order eliminating tariffs, excise duties, and VAT on selected medical machinery and raw materials. This measure aimed to reduce local production costs and enhance competitiveness.

However, BMI notes that these interventions may not be enough to offset the economic challenges, adding, “Despite these attempts, Nigeria’s medical devices market will continue to face operational and demand headwinds over the near term.”

While Nigeria grapples with high import dependency and rising costs, the global medical devices market continues to grow. By 2028, Nigeria’s market is anticipated to reach N171.1 billion ($344.7 million), primarily driven by the large population, high rates of chronic and communicable diseases, and a push toward universal health coverage.

“Improving health spending through a focus on universal health coverage, coupled with a large population size and double burden of chronic and communicable diseases, will sustain high demand for all medical devices, particularly diagnostics, consumables, and hospital equipment over the near to medium term,” BMI said.

Manufacturing Challenges, Companies’ Exodus

In recent years, several foreign manufacturers, including major pharmaceutical companies, have suspended or halted operations in Nigeria due to the harsh economic landscape. Türkiye’s Jubilee Syringe Manufacturing (JSM), once a major syringe producer, paused its Nigerian operations in January 2024, citing operational disruptions. This decision followed similar exits by Sanofi and GlaxoSmithKline, which withdrew due to challenging conditions in Nigeria’s macroeconomic environment.

“Key barriers include the scarcity of skilled labor, limited access to modern technology and inadequate infrastructure,” the report notes, adding that these obstacles make Nigeria a tough landscape for local production in the medical device sector.

Industry expert Dr. Kehinde Olu, CEO of Nigeria’s Medix Technologies, shares the impact of these challenges: “Local manufacturing for medical devices in Nigeria is a distant goal. The infrastructure simply doesn’t exist yet to make domestic production competitive. The costs associated with importing raw materials alone make it difficult for any company to maintain an edge in the global market,” he said.

Regulatory Bottlenecks

Another critical impediment, according to the report, is the cumbersome regulatory environment, which creates significant delays in the approval process and complicates the entry of new medical devices into the market.

“The country faces a substandard regulatory environment and bureaucratic hurdles which often delay the approval and market entry of new medical devices, discouraging investment and innovation,” BMI outlines.

The recent operationalization of the African Medicines Agency (AMA) has the potential to improve the regulatory landscape for medical products across Africa, but the report cautions that it will take time to feel its impact fully.

“If implemented effectively, the AMA could enhance regulatory alignment across African countries, but the benefits for Nigeria’s market are only likely to materialize in the long term,” BMI asserts.

Infrastructure and Supply Chain Hurdles

The report also underscores that Nigeria’s unreliable electricity supply, transportation networks, and limited access to technology are significant impediments to local production.

“Despite government efforts to incentivize local production, these structural challenges, in addition to a challenging macroeconomic environment, will limit growth prospects for medical device manufacturers in Nigeria,” the report said.

While the naira’s depreciation is expected to make imported medical devices increasingly unaffordable, a weaker currency could benefit exports by enhancing the competitiveness of locally manufactured medical products, according to BMI. However, without substantial improvements in infrastructure, skilled labor availability, and regulatory efficiency, the report suggests that local manufacturing will struggle to take advantage of this potential export edge.

“Despite government efforts to build a conducive environment, persistent structural and macroeconomic issues are likely to continue to challenge Nigeria’s medical devices market growth over the near to medium term,” the report said.