How Low Capability Yet Organisationally Powerful Firms Sustain a Low-Level Equilibrium in the Nigerian Pharmaceutical Sector

Nigeria’s pharmaceutical industry remains locked in a low productivity equilibrium, with manufacturing concentrated in similar lower end therapeutic categories and limited technological upgrading. This is despite key policies and institutional reforms. In the absence of credible conditions that can incentivise and compel technological upgrading and high levels of learning effort, Nigerian pharmaceutical manufacturers have relied on rent seek strategies to shape the introduction and direction of sectoral industrial policies. This has led to the protection and consolidation of rents from dual sources. On one hand, leading pharmaceutical companies leverage political networks to sustain rents generated from the limited range of medicines that benefit from the domestic market protection policy. On the other hand, the same networks are used to protect significant revenue streams from imported medicines. At the centre of this informal institutional arrangement is a weak and resource constrained state that is unable to effectively incentivise and compel complex manufacturing activities, while also tasked with ensuring medicine availability and preserving rents for politically connected industrialists. By integrating rent analysis with a focus on organisational power, it interrogates why effective institutions have not emerged and why low productivity persists. The findings suggest that policies targeting Nigeria’s pharmaceutical industry have been ineffective due to weak incentives, which are linked to the state’s limited capacity to create credible conditions for firms to invest in high levels of learning, and to compel, discipline, and ultimately reward performance. This framework is further applied in a comparative analysis of Nigeria and Uganda’s divergent outcomes in policy support for local manufacturing of quality-assured antimalaria medicine – artemether-lumefantrine. The framework is also used to systemically examine the contrasting trajectories of similar domestic market protection policies in Nigeria and Bangladesh, highlighting how differences in both macro and sectoral political settlements help explain the varying effectiveness of otherwise similar industrial policies. Departing from dominant explanations that focus on constraints to technological advancement in medicine manufacturing, such as access to finance and infrastructural deficit, this thesis examines the interaction between low productive capabilities and organisational power as a methodologically useful way of assessing how incentives for learning function and why they can produce desirable objectives in one polity and adverse incentives in another, as well as across different therapeutic categories within the same country.