Opinion: That 20% Tax On Imported Medicines

That 20% Tax On Imported Medicines

By Achilleus-Chud Uchegbu

Recently, the federal Government of Nigeria imposed a 20% tax on imported medicines in a new tax policy called Import Adjustment Tax. Prior to this, Nigeria had 0% duty on imported drugs. This is a consequence of an ECOWAS Committee on Health recommendation that member states charged 0% duty on imported drugs. This became necessary when ECOWAS reasoned that healthcare needs of the region cannot be adequately addressed by the available drugs manufacturing companies.

For instance, Nigeria has about 300 registered drugs manufacturing companies. Of these, only five are certified by the World Health Organisation (WHO). This means lack of capacity to adequately manufacture and supply necessary medicament to attend to the different types of diseases affecting people in the country.

Before the ECOWAS protocol, the World Trade Organisation (WTO), in 1988, recommended not more than 5% duty on drugs, to member states. Again, WTO viewed drugs as one of life essentials. ECOWAS upheld that view. In 2013, Nigeria adopted the ECOWAS recommendation and started a regime of 0% duty of drugs excluding other port charges (Nigerias’ is the highest in Africa).

Prior to the adoption of the 0% duty in Nigeria, the country battled with the menace of fake drugs. Experts and stakeholders argue that the high incidence of fake drugs in Nigeria had direct relation to high duty on imported drugs, which prior to 2013 was 20%. Critical stakeholders in the healthcare sector engaged government and ensured that the ECOWAS recommendation was adopted as incentive to clean and affordable drugs in the Nigerian market.

However, a recent circular from the Federal Ministry of Finance has re-imposed a 20% tax on imported medicines as a way to boost revenue drive of the government. This is without recourse to negative effects of such imposition.

As a consequence, there has been a drastic rise in the prices of drugs in pharmacies and drug stores across the country. Everyday medicaments are becoming scarce and expensive as importers shy away from importation due to the 20% tax coupled with high port charges and forex disparity. The naira, at the moment, exchanges for about N500 to $1. And the importers are expected to source forex from whatever source they can.

What the new tax regime will achieve is a reversal of gains made in the fight against fake drugs. It will open the gateway for merchants of fake drugs to return to trade. As a variety of drugs disappear from the pharmacies, so would fakes replace them and at affordable prices. The summary would be that the Federal Government, in the bid to boost its revenue, may have inadvertently, created avenue for the instalmental killing of Nigerians by exposing them unclear and fake alternatives.

To boost government revenue is necessary, but it ought not to come at the expense of the health of Nigerians. Interestingly, President Muhammadu Buhari, speaking at the flag-off of the revitalisation of primary healthcare centres, for which there is at least one in each local government area in the country, said: “Our goal of revitalising the Primary Health Care centres is to ensure that quality basic health care services are delivered to majority of Nigerians irrespective of their location in the country.
“We shall focus more on people living in the rural areas and the vulnerable population in our society such as women, children under five years of age and the elderly in collaboration with the national and international partners”.

The President also indicated, in his speech, that “out of pocket payment for health constitutes over 70% of total health care expenditure. This is more than the globally recommended 30-40%. However, only less than 5% of the total population is covered by any kind of health insurance or risk protection mechanism which is against the recommended 90% coverage by the World health Organisation. Our vision is to reverse this unsatisfactory situation and better care for the poor and needy”.

The Health Minister, Prof. Issac Adewole also tweeted saying “our plan to achieve UHC is implementing PHC revitalisation policy because it is the base…70% of Nigerians can receive care at primary level”.

Hon. Chike Okafor, who chairs the House of Representatives Committee on Health said at a public hearing on the need to avert National Health Crisis through revitalisation and adequate funding of primary healthcare system held in November 2016 that “currently, there are 774 Local Government Areas with 9,572 political wards in Nigeria. At least, each of the LGAs has one primary healthcare centre that is not functional. Most of these PHC centres lack drug supplies, basic health infrastructure and cannot boast of a good number of medical personnel. In fact, patients accessing these PHC centres can hardly afford the cost of transportation or cost of subsidised drugs due to the economic hardship facing most rural dwellers.”

Statistically, malaria killed 192,284 people in Nigeria in 2015 alone. 143,688 died of diarrhoea killed while neonatal and maternal failures claimed 212,557 lives. These are exclusive of fatalities from cancer, diabetes, cardiovascular diseases and other auto immune disease.

With these in mind, the Federal Government still imposes a 20% tax in contradiction of its promise to provide affordable healthcare in Nigeria. There is a clear disconnect between President Buhari’s healthcare visions and the strategy to achieving them.

There is therefore a need for urgent review of the new tax regime. Most patients are suffering due o astronomical increase in the prices of drugs, which is however, not supported by the earnings. For healthcare to be sustainable, it must be affordable and available. As it is now, purchasing power of the people is abysmal and cannot support a healthcare that is not affordable in an environment where health insurance is lacking.

If indeed the President Buhari administration seeks to make healthcare affordable and available, it must go beyond building hospital wards and drop the new 20% tax regime and ensure that drugs are readily available while working on strategies to increase capacity for local production of all drugs.