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CBN’s N100bn healthcare fund lifts companies but forex hurdles linger –

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Defying the dark view of the COVID-19 pandemic outbreak that showed up in utter breakdown of livelihood and the pile of pressure that hit Nigeria’s fragile healthcare structure, a positive outlook of the pandemic is unfolding as interventions reel in gains for companies operating in the most exposed sector.

The Federal Government seeing the level of risk at hand waded into the sector with a N100 billion intervention fund provided through the Central Bank of Nigeria (CBN) for pharmaceutical players and it is somewhat paying off.

The sector has seen players access the fund to alleviate the harsh effects of the pandemic and in fact, set them on a real path of recovery.

Most local pharmaceutical industries with the aid of the fund have boosted their production capacities to manufacture facemasks, personal protective equipment (PPP), hand sanitisers, gloves, anti-viral drugs, ventilators, medical supplies, and vaccines.

These were products that became very scarce internationally during the peak of the first wave of COVID-19 as the world leading producers and suppliers hoarded in the bid to protect their countries’ interest.

Of that fund, N93 billion has been disbursed to beneficiaries, according to data provided by the CBN, with the growth reflected in the private sector as envisioned by the apex bank.

The chemical and pharmaceutical products sub-sector of manufacturing, for instance, grew almost triple fold from 3.91 percent in the first quarter of 2021 to 9.24 percent in the second quarter of the same year, the latest gross domestic product (GDP) report released by the Nigeria Bureau of Statistics (NBS) shows.

The data also indicate that human health and social services sector almost doubled from 1.89 percent in the second quarter last year to 4.92 percent in the second quarter this year.

“Some of the impact can already be seen in the financial performance of the early recipients of the loans,” said Uyilawa Okhuaihesuyi, president, Nigerian Association of Resident Doctors (NARD), noting that the “federal government through the CBN had offered pharmaceutical companies and medical practitioners low-interest rate loans to improve local manufacturing and increase their capacities to combat the ravaging COVID-19 pandemic and other related health challenges. It is commendable.”

Fidelis Ayebae, chairman, Pharmaceutical Manufacturers Group of Manufacturers Association of Nigeria (PMG-MAN) confirmed that the majority of the group member companies that met the loan requirement received it.

Elated about the initiative and implementation, Ayebae said members yet to access it was working with the commercial banks with which they have a relationship to close up documentation gaps before proceeding to the CBN.

With the focus on to strengthening the sector’s capacity to meet the potential increase in demand for healthcare products and services, the intervention has provided credit to indigenous pharmaceutical companies and other healthcare value chain players to build or expand capacity.

The scheme is expected to increase private and public investment in the healthcare sector, facilitate improvements in healthcare delivery and reduce medical tourism to enhance foreign exchange conservation.

Lolu Ojo, a consultant pharmacist and medical director, Merit Healthcare said even though some of the funds came later than expected, some big companies accessed the fund and they experienced substantial impact.

However, the hurdles around access to foreign exchange for manufacturer’s purchase of key inputs and equipment remains a fundamental challenge to the overall realisation of outcomes targeted by the scheme.

Sam Ohuabunwa, president, Pharmaceutical Society of Nigeria (PSN) said the CBN COVID-19 intervention despite being laudable, it is yet to achieve its objective as the consequence of the difficulty in forex access portends grave danger that undermines its objectives.

The longer it takes to get the machines and equipment in, the longer it will be for Nigeria to begin to see an enhanced local production, Ohuabunwa decried.

Read also: CBN’s e-naira raises speculations about sustainability

That also means increased difficulty will face benefitting companies as they attempt to begin production and generate cash flow to meet the interest and repayment obligation as the moratorium is fast approaching.

“Also with the foreign exchange at rates higher than the planned or forecasted rates in the business plan, the money received in naira may no longer be sufficient to meet the stated needs. And the longer the naira is left in the banks awaiting piecemeal allocation of forex, the faster the value depreciates under growing inflation and the fewer the number of machinery and equipment or even raw materials that can be bought,” Ohuabunwa explained.

This mirrors the federal government’s need to deal with a couple of more hurdles in the way of beneficiaries in addition to addressing the core issue of financing.

Osita Nwanisobi, head, corporate affairs, CBN acknowledging the bane said provision of funding is its first step to addressing the numerous challenges confronting the healthcare sector.

The Health Sector Intervention Facility (HSIF) was established to address health infrastructure decay in the country, for instance, with over N85 billion disbursed till date, covering 82 projects.

About N22.5 billion has been disbursed to states for revamping primary health care centres across the country.

Nwanisobi said the HSIF has financed projects including the acquisition and installation of 16 magnetic Resonance Imaging (MRI) Machines across the country; and acquisition and installation of 22 medical, scanning machines by hospitals across the country.

“These are verifiable and we confirm that they have been installed,” he said. “On monitoring, we are evaluating the utilisation and thus far there has not been any diversion. We need to understand that this is a health intervention and the health sector is regulated.”

Stating further, he said the Real Sector Support Facility-Differentiated Cash Reserves Requirement (RSSF-DCRR) of the CBN continues to fund the scheme with disbursements made by Participating Financial Institutions (PFIs).

The eligible financial institutions are Deposit Money Banks (DMBs) and Development Finance Institutions (DFIs). He said the loan amount limit to be provided is based on whether the loan is to fund working capital or a term loan.

A loan for working capital purpose has its limit based on whether the eligible participant has been in operation for up to three years at the time of applying for the loan, he clarified.

In the event that the loan is for working capital and the applicant has been in operation for at least three years, the loan limit would be calculated at 20 percent of the company’s three year average of its turnover, up to N500 million.

“Where the loan is for working capital and the eligible participant has not been in operation for at least three years, the loan limit shall be calculated at 20 percent of the company’s previous year’s turnover, up to N500 million,” Nwanisobi said.

He noted that where it is a term loan, the limit would be N2 billion for the eligible applicant and interest rate is no more than five percent per annum all-inclusive for loans taken until February 28, 2021, and nine percent per annum for loans taken from March 1, 2021.

The loan tenor depends on whether the loan was taken for funding working capital or if it is a term loan. For working capital, the tenor shall be for a period of up to one year, with an option for rollover for no more than three years.

For a term loan, the tenor should be up to 10 years with a maximum of a one-year moratorium on repayment. Except for term loans for construction projects, the tenor of which shall be determined by the completion date, he noted.

In terms of repayments, it will be broken down into interest and principal repayments, which will be paid in instalments as provided by the PFIs.

The PFIs will remit the repayment to the scheme each quarter.

What an eligible applicant has to do is to submit an application to a PFI of its choice with supporting documentation including a business plan. The PFI will conduct due diligence on the application and upon approval by the PFI, the application will be forwarded to the CBN for approval.

“When CBN approves the application, the funds will be disbursed to the PFI for release to the eligible participant. Delays or non-release of funds to eligible participants within the timeline stipulated in the offer letter shall attract a penalty at the PFI’s maximum lending rate. The intervention shall end by December 31, 2030.”

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