Report: Naira could drop to N1,993/$1

According to a recent analysis by BMI, a division of Fitch Solutions, the naira is expected to weaken to N1,993 versus the US dollar by 2028, which will provide a serious obstacle for Nigeria’s pharmaceutical sector, especially when it comes to importing necessary medical equipment.

In the report titled “Weak Naira and Structural Challenges to Constrain Nigeria’s Medical Devices Market Growth”, BMI projected that despite an anticipated rebound in the economy, Nigeria’s medical devices sector will face operational and demand challenges in the near term.

The report noted that Nigeria relies on imports for over 95 per cent of its medical devices, making it vulnerable to fluctuations in exchange rates.

“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 N1,993/$ from N306/$ 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,” the report stated.

A weaker naira would make locally produced medical devices more competitive, but BMI pointed out that there are still obstacles to local manufacturing.

Despite government incentives, these factors—such as a lack of qualified labor, restricted access to contemporary technology, and poor infrastructure—continue to impede industrial endeavors.

President Bola Tinubu’s administration has taken steps to lessen these tensions. In order to lessen domestic production costs, an executive order was issued in June 2024 to eliminate value-added tax, excise charges, and tariffs on certain machinery, equipment, and raw materials.

Nonetheless, BMI noted that the market for medical devices will likely continue to encounter formidable obstacles in the near future.

According to the report, Nigeria’s medical equipment market might reach a valuation of N171.1 billion (£344.7 million) by 2028, driven by the country’s sizable population, growing emphasis on universal health care, and the combined burden of communicable and chronic illnesses.

Nigeria’s economy is anticipated to rebound in 2025, with a growth rate of 3.0% anticipated in 2024, up from 2.9% in 2023.

However, enduring problems including high inflation, stricter monetary policy, and low foreign direct investment may hinder the medical devices industry’s expansion.

The PUNCH further noted that on Monday, November 11, 2024, the naira was trading at N1,681.42 per dollar, which was a slight decrease of 0.15 percent from Friday’s closing rate of N1,678.87 on November 8, 2024.

Lower market activity was indicated by the large decline in FX turnover on the official market, which fell by 66.41 percent from $1.4 billion on Friday to $471.5 million on Monday.

The naira fluctuated between a high of N1,695 and a low of N1,631 throughout the reviewed period.