Market News

…Pharmaceuticals are most expensive to clear

Clearing a 40-foot container of pharmaceuticals – drugs, and medicaments, costs nothing less than N28 million about a 300 per cent increase from N7 million used to clear such goods about a year ago.

This is all thanks to the impact of naira depreciation against the dollar and the volatile exchange rate for calculating import duties, which is pushing the cost of cargo clearing at the port to the rooftop.

Importers of consumables and raw materials are now facing serious inflationary pressure and trying to stay above barriers due to the present economic headwinds.

Tariffs and levies paid on imported goods started skyrocketing in 2023 after President Bola Tinubu’s administration liberalised foreign exchange rates and implemented the floating naira policy.

BusinessDay checks show that the cost of clearing has risen by 110.3 per cent – from N770.88 to a dollar pre-reform era to 1,621.259/$ as of October 6 – since the Federal Government’s FX reform in July 2023.

Meanwhile, the cost has risen by about 70.3 per cent when compared to the rate of N951.941/$ used to clear goods at the beginning of January this year.

The FX rate for calculating import duties at the port also became volatile when the Nigeria Customs Service (NCS) started using fluctuating FX rates for calculating import duty in line with the 2023 Customs Act.

Read also: Shippers’ Council moves to ease clearing of trapped export containers at port

“Clearing a 40-foot container of pharmaceuticals costs nothing less than N28 million,” said Tony Anakebe, managing director of Gold-Link Investment, a clearing and forwarding firm with a special interest in pharmaceuticals.

This, he said, explains why prices of quality drugs are expensive in Nigeria while affordable ones are mostly ineffective.

“A packet of BP drugs that was sold for N4,000 a year back now goes for between N11,000 and N13,000. Nigerians don’t buy malaria drugs easily because most of the effective anti-malaria medicines are either not available anymore or very expensive,” he explained.

Most pharmaceuticals come in 40-foot refrigerated containers, a special container used to ensure that medicines get to their destinations in good condition, certifying them safe for consumption.

The federal government once announced the removal of import duty from pharmaceuticals, but Anakebe said that has not helped the market prices of drugs due to the 20 per cent levy on imported medicaments.

It is for this reason that analysts say, Nigerians lose their lives for lack of resources to buy routine medicine as prices surge.

With the naira receding to N1,635.15 per dollar as of October 7, 2024, from N702.19/$ on June 15, 2023, according to data from the FMDQ, the naira has lost 132.86 per cent value against the dollar since FX reform in June 2023.

Aside from pharmaceuticals, importers of other types of goods spend between N6 million and N14 million to clear 20-foot and 40-foot containers from Nigerian ports.

“The amount paid as a tariff on imported goods depends on the items. The HS Codes – have different percentages of duties attached to them. Some duties are 30 percent while others are either 50 or 100 percent duty rates,” Jonathan Nicole, a member of the Shippers Association of Lagos State, told BusinessDay.

He warned that if import policies are not checked, the inflationary pressure will be unacceptable to importers.

Since the FX reforms, Nicole explains, the FX rate for clearing goods is almost the same as the rate of naira to dollar rates in the foreign exchange market. Confirming that import tariffs have surged, Nicole said the import business is being suffocated by harsh policies and multi-dimensional taxes paid on goods.

Citing an example, he said importers also pay a 7.5 per cent value-added tax (VAT) on the gross value of the imported goods to Customs in addition to shipping and terminal charges.

Meanwhile, analysts have suggested pegging the FX rate for calculating import duties but the government has yet to implement that. While many say N1000 per dollar, the Presidential Committee on Fiscal Policy suggested N800 per dollar.

Muda Yusuf, director general of the Centre for the Promotion of Private Enterprise (CPPE) called for a review of the 2023 Customs Act and pegging the exchange rate at between N1,000 and N1,100.

Despite calls for a rate review, there seems to be no hope in sight as Taiwo Oyedele, chairman of the committee, said a few days ago that the federal government’s decision not to approve a fixed exchange rate for calculating import duties was due to the 2023 Customs Act. Oyedele said the president could not sign an executive order to implement a fixed exchange rate for Customs duties, as the 2023 Customs Act mandates a market-driven exchange rate.

Oyedele however said the committee is working to ensure that the law is modified shortly to allow for exchange rate adjustments.