Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria (2007)

The issues raised in this report concern three entities: developing country governments that are unable to meet some of the basic needs of their populations, the philanthropic and international financial and foreign assistance agencies that are dedicated to assisting people, and entrepreneurs and businesses that may be able to address the unmet needs. Examples of the needs described here are electric energy for homes, safe water, and an effective malaria medication. These goods and services are not usually provided for free even by government. Most people expect to pay for them, but generally at subsidized prices that the majority can afford.

The proverbial life-sustaining needs—food, clothing, and shelter—are not addressed here, because few governments provide these necessities, even at subsidized prices. However, in the areas of energy, safe water, and medicines governments generally provide some services, because they affect not only quality of life and health, but also productivity, as any worker who has suffered from severe diarrhea or malaria can testify.

The reasons that some populations are not receiving power, water, or medications are usually financial and technical, not necessarily political. Rural populations may be far from the electricity grid and widely dispersed so that it might be uneconomic, even in wealthy countries, to provide electricity at a reasonable cost. The same is true of municipal piped water. Technical difficulties compound the problem; poor infrastructure causes intermittent and low-quality energy and water supplies, blackouts, and contaminated water, even in big cities. Effective malaria treatment,

like the treatment for HIV/AIDS, is limited by the prohibitively high costs of the drugs compared with the earnings of most of the sufferers. It differs from HIV/AIDS, however, in that the latter is considered high priority by the United Nations and the developed world. A high-powered international effort is under way to provide sufferers with antiretroviral drugs, and many governments have provided significant funding. That said, malaria has received ever greater attention over the last eight years, and so resources may continue to grow. The drug distribution network for malaria is much different from that for HIV/AIDS, however, and requires different financing mechanisms.

Very often the task of remedying these deficiencies is left to the international and local nongovernmental organizations (NGOs) operating within the country. These groups are funded by philanthropic foundations, bilateral aid agencies, or international organizations. Their effectiveness is measured in terms of the number of homes or communities electrified, the water delivered or water purification systems installed, or the malaria treatments donated, but rarely are those most in need served by such efforts. Those who are recipients usually do not pay for the products or services, and so such solutions are rarely sustainable. When the funds are exhausted or the interest of the NGO or its donors changes, the service ends. People who have been receiving free power, water, or medicine find there is no infrastructure or commercial businesses to provide these goods and services at affordable prices, and often they are little inclined to pay substantial funds for what they had come to consider a free entitlement.

The strategy of private companies providing public goods and services, which is the subject of this report, has a role for governments, donors, NGOs, and, of course, private businesses. For governments, rather than attempting to provide commodities or services directly to needy communities and families, their policies should be aimed at encouraging private companies to fill these needs while making a profit (sometimes called “doing well by doing good”). The workshop reports outlined in this report and presented more fully in the appendixes describe how companies can operate at a profit in Nigeria while providing poor people with the three products and services used as examples. With profits to be made and where the banking and business environment is congenial, there is a good chance that the solutions will be self-sustainable and not require continual government input. This is particularly true in a vibrant entrepreneurial society like that of Nigeria if the solutions are properly managed and promoted.

Although many companies profess to be motivated by a social conscience, fashions in social conscience sometimes change. For sustainability in providing services to the poor in developing countries, it is necessary to enlist the existing private, profit-making businesses and to encourage the creation of new ones. Incentives should be aimed at responsible companies that are willing to compete on price, quality, and service to the consumer. Three motivational factors would attract the kind of companies desired:

1. good probability of making a profit over the short to medium term at an acceptable risk, including legal risk

2. availability of credit for building the business, and, in some cases, for the consumer

3. availability of the skilled labor needed to run the business

An antimotivational factor for responsible companies would be an arrangement in which the government contracts directly with companies for products and services to be delivered to consumers or laws that require compliance by consumers, such as displays of solar collectors on roofs.

The first motivational point is most likely satisfied by the huge potential market of households who are served intermittently or not at all by the electricity grid, who do not have safe drinking water, or who suffer from frequent bouts of malaria. However, most families will not have access to cash to purchase a solar home electrical system. Nor will a community have the resources to order a community water system. Nor is there easy access to consumer credit based on the system itself as collateral. (The situation is somewhat different for artemisinin, which is discussed separately later in this chapter.) Furthermore, many potential consumers are not aware that some of the new, affordable technologies will allow them to improve the quality of their lives and health.

An argument for private sector involvement is indeed that many different technologies are available for exploiting a renewable energy resource or purifying water at low cost. For electric power, these technologies include several models of solar home systems, microhydro systems for those living near streams, and small wind systems for those in windy areas. For safe water, many technologies besides the two discussed in the workshop—ceramic filters and ultraviolent (UV) purification—are available. Because there may be reasons why a particular design is inappropriate for a particular family or village, incentives to companies about the

choice of a particular product or system should be flexible. The inclusion of a maintenance contract, preferably paid periodically rather than up front, would seem to be required for all poor families. It probably would also be required by a supplier of consumer credit, who would test compliance regularly, at least for community-size water purifiers and solar systems. The governments of some countries offer coupons that can be exchanged for payment for service contracts on solar energy systems. But this scheme should be considered with care. Because banks are likely to require a service contract, coupons might lead to a situation in which government intervention to provide coupons becomes a part of the consumer credit system. An alternative method is to include the service contract as part of the cost of installation, with incremental payments made on the contract through the term of the loan.

For solar electric systems, availability of consumer credit would be an important incentive to the would-be installer. In India, SELCO itself generated the market for consumer credit by means of an intensive training and education campaign for bank officers until nearly all banks in the state agreed to lend for solar systems (see Chapter 3). Alternatively, the government might guarantee such loans under the appropriate conditions. In the United States and other countries, tax incentives are offered to the purchasers of renewable energy systems.

A government-sponsored public education campaign could alert consumers to the advantages of light in the home and safe water for children, and at the same time alert companies to the possibilities of supplying these products. Appropriate slogans might include: Wash your hands! Filter your water! Light up Nigeria with renewable energy! Guaranteed credit available for home solar lighting systems!

Consumers will need training to use many of these systems in the home. Training will generally be the task of the sales agent, but the government might also assist. Experience in other countries with properly trained home extension agents in rural areas demonstrated that they could detect health risks and encourage solutions, while training families in the need for and use of filtered water or home solar systems.

Legislation encouraging the use of renewable energy sources, in general, perhaps with tax benefits, would encourage the use of solar home systems. However, there is an urgent need to clarify the liability of a private company distributing water or electrical energy to homes and communities. At present, they are at risk of prosecution as intruders into the prerogatives of the related ministry, and no new industry will be created while that situation exists.

The role of the government from this perspective is that of enabler, not implementer. This philosophy is applied in many countries, developed as well as developing countries, in the public works arena. For

example, private companies build toll roads on public land; they collect the tolls for a certain number of years to reimburse them for the costs and to make a profit; and then they turn the roads over to the government. These associations are generally governed by an initial contract and continuing regulation. For the three examples proposed in this report in which the products and services are delivered to individual families, the situation could be simpler. Dozens of separate companies would provide the products and services, but, as enabler, the government would make any agreement with the customer, who would take responsibility for selecting the vendor and the product, or with a much smaller number of financial institutions, which would monitor compliance.

It appears to the committee for this study that the potential for success of an initiative to manufacture artemisinin combination therapies (ACTs) for the local market, the largest in the world, and for export depends on adequate global financing for the drugs. The strategy under development for financing is a global subsidy, first proposed by the U.S. Institute of Medicine, which is part of the U.S. National Academies (see Chapter 3).

Every interested country has a national committee that deals with the Global Fund (see Chapter 3). In Nigeria, this committee or some other coordinating body should become an active player and prepare to make the first proposal. Such a step may require contact not only with the World Health Organization (WHO), but also with the potential funders directly. It is important for all players, growers, and pharmaceuticals, to work together, in coordination with the government, to put Nigeria into the international ACTs business. Strong leadership is required at the national level. The economics and financing of such a venture deserve considerable analysis and scrutiny, not only by the private sector actors that might be involved, but also by government, possibly academic researchers, and possibly the Nigerian Academy of Science. Understanding the full economic implications of starting ACT production will be vital to a sound enterprise.

The international standards for product quality and appropriateness are yet another aspect of artemisinin manufacture that must be studied carefully. These standards, WHO’s current Good Manufacturing Practices (cGMPs) and prequalification, were described in Chapter 3. Fully accredited manufacturing will be essential for Nigerian products to be eligible for international financing (e.g., through the Global Fund) or for a global subsidy, should one become a reality.

There are many ways in which the government could promote the

manufacture and distribution of ACTs. Direct actions could begin by providing suitable land for growing artemisia without preconditions on employment or distribution that might inhibit the agility of the proposed company to make a profit. This approach might be followed by a program to provide first-stage financing for new start-ups or grants to encourage pharmaceutical companies to enter the market. Assistance to companies to achieve prequalification would shorten the timetable. This assistance could be reinforced by using the purchasing power of the government to make an advanced market commitment in order to serve the children under five and any other populations to whom the drugs have been promised at government expense. However, donations of free medicine will reduce the market and might adversely affect companies that expect to make a profit by providing Nigerians with ACTs, unless the product was procured locally.

A secondary level of assistance would involve standards, quality control, and steps to prevent counterfeits. Counterfeit ACTs have already shown up on the international market with serious consequences for patients.¹ All counterfeits, clones, and low-quality products, including non-ACTs, should be banned from the Nigerian market to protect the public and assist the new manufacturers at the same time. This effort should be complemented by public campaigns encouraging Nigerians to use bed nets, clear away standing water, spray walls with DDT, and take the correct medicine (ACTs rather than monotherapy or blister packs). Materials and strategic plans are available from WHO and other agencies. Finally, a program of public education in the schools on the avoidance and control of malaria should be cost-effective and successful, as similar programs on HIV/AIDS and smoking have been in other places.

The government could also take the following specific actions to encourage ACT production:

• providing waivers on duties on imported equipment, raw materials, solvents, and other materials involved in ACT production

• enforcing a ban on artemisinin monotherapies

• assisting in training and research on the agronomy of artemisia and best ACT formulations for Nigeria

• arranging media advertisements to promote effective malaria therapy and completion of courses of treatment

• passing legislation to require the distribution and use of ACTs at all government clinics, hospitals, and agencies

With government assistance, the Nigerian malaria community must inform itself about the state of play on the international scene, which is critical to entering the international market. The world has recognized that malaria requires a special effort. New coformulations are in the late stages of development by various groups, including the Drugs for Neglected Diseases initiative (DNDi) and the Medicines for Malaria Venture. The next steps involve developing licensing agreements with manufacturers to produce the drugs. Nigeria must constantly be aware of progress and contribute to the process as opportunities arise. There will be no other way to succeed in this market.

The proposals advanced here are ambitious. If 100 million people in Nigeria are without safe water, home lighting, or effective malaria therapy, then tens of millions of households may be a potential market. Companies such as SELCO and WaterHealth International serve tens of thousands in the countries in which they are active, and a thousand similar enterprises could be required to meet the needs of all Nigerians. The demand for imported solar cells, UV filter units, and solvent extraction plants for artemisinin would have a large impact on the present world market for these products, and Nigerian companies and local subsidiaries of international companies would emerge to capture some of that market. Because the science-based solutions in this study are complex technological products for which global competition has not been great thus far and which are not presently manufactured or used in Nigeria, there will be an ample opportunity—and even necessity—for innovation, if only to avoid patents. New jobs will appear for engineers, scientists, and public health workers, among others, and universities will be presented with new opportunities to undertake both research and training.

Some Nigerian university laboratories are already active in these areas. And other universities in Nigeria will find it advantageous to enter these and other fields with similar potential, such as low-cost construction, solar cooking and refrigeration, and micro wind and hydroelectric energy sources. Many would benefit from scientific cooperation with universities overseas, and should consider innovative approaches to that process as well.

Traditionally, international scientific cooperation between universities has been dominated by the exchange of faculty and students for training and research. In the last few years, however, international travel has in some ways become more difficult; it is now harder to obtain visas, and developed country universities have fewer resources to accommodate foreign visitors. Moreover, the costs per visiting scientist and student

have risen; research materials have become more expensive; accounting of materials and equipment has become more rigorous; and grants are less flexible to accommodate visiting scientists and students.

Meanwhile, technological advances such as information technology have made the traditional modes of cooperation less necessary. For example, by means of long-distance learning students can take classes online, and effective collaboration among researchers can be achieved via the Internet, requiring few visits between laboratories. Video teleconferencing is another useful means of linking researchers internationally. The tools of information technology should be deployed to optimize collaboration and productivity in the research effort that will accompany the strategy proposed here.