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Home Business News

Why Swiss Pharma Divested From Nigerian Operations

Nairametrics by Nairametrics
March 22, 2017
in Business News, Company News
Why Swiss Pharma Divested From Nigerian Operations
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Nairametrics| Swiss Pharma, today announced that it has divested 95% of its stake in its Nigerian operations to a French Company Biogran. While the value of the transaction was not stated, it marks the first deal for the French company in Africa. It also marks the end of an era for Swipha which was established in Nigeria in 1976.

Several factors may have led to the decision of Swipha pulling out of the country. The currency devaluation and difficulties in accessing foreign exchange has hit companies in the pharmaceutical sector very hard. A significant proportion of their raw materials are imported into the country. Trade policies adapted by the government have also made imported drugs cheaper than locally manufactured drugs. Under the ECOWAS Common External Tariff (CET), drugs imported into the country attract no duty. Raw materials for manufacturing drugs attract a 20% duty.

The tough business climate may also have contributed to the exit of Swipha. A combination of the recession and a sharp rise in inflation, has left consumers with less disposable income in their pockets. Many companies operating in Nigeria, are unable to pass on the increase in prices to their customers, thus reducing their profit margins. The few pharmaceutical firms on the Nigerian Stock Exchange (NSE) have generally performed poorly; most are trading as penny stocks and having a chequered record as regards their profitability.

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Biogran, the new investor may have bought into the company to get a foothold in Nigeria, and indirectly to West Africa. The firm specializes in generic drugs, which are basically the same as your big name brands, but relatively cheaper. They may also have access to cheaper, long term funds which could enable them to weather the Nigerian financial storm better than Swipha.

 

 

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