Projected Naira Depreciation to Hit Healthcare Imports
Nigeria’s naira is forecasted to depreciate to N1,993 per dollar by 2028, significantly affecting the country’s ability to import medical devices, according to a report by BMI, a Fitch Solutions subsidiary. This decline could present a severe challenge to Nigeria’s healthcare industry, which is heavily reliant on foreign medical equipment. The report, titled “Weak Naira and Structural Challenges to Constrain Nigeria’s Medical Devices Market Growth,” indicates rising operational costs and limited consumer purchasing power as major concerns.
Heavy Dependence on Imported Medical Devices
Over 95% of medical devices used in Nigeria are imported, making the sector highly susceptible to exchange rate fluctuations. According to BMI’s analysis, as the naira continues to weaken, import costs will increase, making essential medical equipment less affordable for both healthcare providers and patients. The weakened naira threatens to erode consumer spending power, which could restrict access to necessary healthcare resources.
Local Production Barriers
While a weakened naira might benefit the competitiveness of locally manufactured medical devices, the industry faces persistent obstacles. Challenges include a scarcity of skilled labour, outdated technology, and limited infrastructure. Although the government has offered various incentives to stimulate local production, BMI highlights these as enduring issues that hinder the growth of the Nigerian medical device industry.
Government Efforts to Manage Costs
In an attempt to reduce production costs, the government of President Bola Tinubu issued an executive order in June 2024. This order eliminated tariffs, excise duties, and VAT on specific medical equipment and raw materials, aiming to make production more affordable. While these measures may ease the cost of production in the long term, BMI notes that the sector will continue to face immediate economic challenges.
Expected Market Growth and Challenges
Despite the challenges, BMI forecasts the Nigerian medical devices market to grow to N171.1 billion by 2028. Factors contributing to this growth include a large population, an emphasis on universal health coverage, and the rising need to combat chronic and communicable diseases. However, the sector’s growth could be restricted by ongoing inflation, high borrowing costs, and weak foreign investment.
Current Exchange Rate Shows Marginal Decline
As of November 11, 2024, the naira traded at N1,681.42 per dollar, slightly down from N1,678.87 on November 8. Additionally, official market turnover dropped significantly by 66.41%, highlighting reduced activity and a lower exchange rate demand. The exchange rate fluctuations underscore the naira’s ongoing vulnerability amidst economic pressures.
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