Market Structure, Conduct and Performance of the Pharmaceutical Industry in Nigeria.
The development of the health sector in every nation is critical in promoting the development of other sector and general socio-economic development of the nation. Unfortunately, many of the problems bedeviling the Nigerian health sector and the pharmaceutical industry in particular over the past three decades still persist to date in spite of decades of development planing and policy reforms. There is thus a need for an in-depth study of the pharmaceutical industry in respect of its market structure, conduct, performance and prospects in order to chart the way forward for the industry to play its proper role in national development. The scope of the study covers 1930 to 2002 in respect of historical analysis and evolution of the industry, while time-series empirical analysis had to be restricted to the period after the 80s on account of data availability and gaps and the instability and volatility of the industry. For the cross-section analysis, the study covered all the pharmaceutical manufacturing firms quoted in the Nigerian Stock Exchange and other major non-quoted firms belonging to the Pharmaceutical Manufacturers Group (PMG) of Manufacturers Association of Nigeria (MAN). Our findings, based upon concentration ratios and empirical test of firm behaviour under various models of market structures, show that the pharmaceutical industry in Nigeria is oligopoly; being a multi-product industry, it is characterized by a combination of Stackelberg equilibrium (Leadership/Followership), Cornot (classical) model, quasi-competitive model, for various groups of products, and generally by market-price stability of the kinked demand curve model, ruling out collusion model and Stackelberg disequilibrium. Concerning the investigation of the prospects of the industry to contribute to national development in terms of contribution to growth as a leading sector and promotion of self-reliance through net export earnings, the findings show that the sector’s prospects are poor in this respect as it is not above average for the economy. In respect of the investigation of the desired basic conditions and favourable macroeconomic environment, based on structure-conduct-performance paradigm, the survey of the firms reveal that the desirable policy strategies required for efficient conduct and performance of the industry include better government funding of research and development through the National Institute for Pharmaceutical Research and Development in collaboration with the universities, support for the establishment of professional distribution network, completion of the third phase of petrochemical project, and the need for the Raw Material Research and Development Council (RMRDC) to also focus on active pharmaceutical ingredients.