Mazi Sam Ohuabunwa is the president of Pharmaceutical Society of Nigeria (PSN). He spoke with finance journalists on the Central Bank of Nigeria’s (CBNs) N100 billion healthcare intervention fund, its impacts on the pharmaceutical and health sector as well as challenges faced. BUKOLA IDOWU was there for LEADERSHIP Sunday. Excerpts
What is your take on the Central Bank of Nigeria (CBN) N100 billion Healthcare Sector Intervention Fund that was launched this year?
It was part of the push we had made in the Manufacturers Association of Nigeria (MAN) and all other pressure groups that the industry, especially, pharmaceutical industry needed special focus. So, we were happy that at last, all thanks to COVID, the government through the CBN eventually came to understand what we were saying. We have said that we cannot grow pharmaceutical production capacity depending on the type of funding that was available from commercial banks. This is compounded by the operating environment and the uncompetitive state of our nation. Foreign direct investment is difficult to come by and we all know that there was a spate of divestment from this country because of the high risk of doing business. So, for us, the N100 billion was a major success and a major response from the government through the CBN. We have not failed to acknowledge this and we have commended and encouraged them.
Since the launch of the fund, how many of your members had accessed the fund?
To the best of my knowledge, practitioners in the industry have done all they can to access this fund. I am aware that many of them who applied, especially those that belong to what you might call the first tier have received approvals. I am aware that many of them had accessed the fund through their commercial banks through which they applied. I am also aware that they have begun to apply the funding they received from the facility to what they wanted to do with the money, most of it being to increase capacity, build plants, get new equipment, start new processes and procedures, expanding manufacturing and also increasing value addition.
Are there any challenges being faced in the process of accessing this fund?
There are different things many companies want to do and they all lead to increased output in the industry because we are headed towards ensuring that local production contributes more to local needs. CBN is supposed to boost that and I must say that from the feedback we are getting from most of those who have accessed the loan, they have put the money into equipment and material because of the shortage of foreign exchange and indeed, many are running a risk of losing a substantial value of this money and are losing on two sides; inflation and depreciation of the naira.
First is inflation that is galloping month by month and then the high level of depreciation of the naira. Many of them are now looking for foreign exchange from the parallel market. I think that those two problems, inflation and depreciation are major threats to proper utilisation of the funds, and then to be able to generate the cashflow to pay back because at the end of the day, it is not free money, it has to be paid back. That is where the risk lies.
Having noted that, we have also sent special request to CBN to make a special provision for pharmaceutical industry and other health care entrepreneurs. Those who have taken advantage of this healthcare fund already indicated what they want to do with the money and much of it certainly will go to importation so, why can’t the CBN just provide the foreign exchange directly for them. This is a special project and they shouldn’t allow the companies go through the torture and pain of begging commercial banks and looking for where to find foreign exchange. That for me are areas where I find difficulty.
From my point of view, it is foreign exchange that is giving the major problem and I hope that this is resolved so that these effort will not turn out to be a situation where we say we are unable to pay back because there are difficulties in meeting the obligation. When this happens, the facility will not serve its purpose because the idea is that if this money is paid back, then it can be recycled and CBN will be encouraged to offer the money to other people and maintain its various effort to help the industry.
Access to foreign exchange has continued to be a challenge especially for manufacturers. Are your members facing the same challenge and how are you dealing with it?
Were our members not aware that there will be issues of scarcity of foreign exchange? Well, we have always dealt with issues of foreign exchange inadequacy in our economy and it is nothing new to us. However, given that it was a special provision, most of the times, when we are buying raw materials, or planning our foreign exchange needs, we plan them over a given period of a year and then we take them on a monthly basis so we can deal with the inadequacies and variation in the market. You are given N2 billion or N2.5 billion and you have only a year moratorium so, you can begin to meet your obligation, and the limited time we have to convert to production is why it has become a problem. All we can do is what we are doing, I know that PMG MAN is in constant discussion with CBN and I know that other stakeholders are doing the same.
The Pharmaceutical Society of Nigeria has written to the CBN and have not received a response but they assured us that they are looking at it and they are doing something to accelerate the release of forex to those who are beneficiaries of that facility. We appeal to CBN to make a special allocation to all those who are beneficiaries of this facility so that they can import materials or equipment, machinery or technology or whatever it is that they have said they will do to boost capacity. We also urge them to elongate the moratorium which is perhaps the easiest thing for the CBN to do or reduce the interest rate.
The rate is single digit and looks reasonable but I think the major thing is the moratorium. Instead of the one year moratorium, they can give a two-year moratorium and then maybe extend also the repayment. There should be a review of the moratorium and interest rate to compensate for the delay. So, that is the risk we are running but that risk can be a little bit reduced if the CBN can be as compassionate and as reasonable.