Nigerian Manufacturers Struggle with Soaring Energy and Shipping Costs Amid Middle East Tensions
The Nigerian manufacturing sector is confronting significant strain as escalating energy expenses and heightened global shipping costs, linked to ongoing tensions in the Middle East, intensify production challenges. According to the Manufacturers Association of Nigeria (MAN), these issues are compounding existing difficulties, including unreliable power supply and high operational costs, placing immense pressure on factories nationwide.
Sharp Rise in Diesel Prices and Energy Dependence
Segun Ajayi-Kadir, Director-General of MAN, highlighted that many manufacturers heavily rely on gas and diesel, known as Automotive Gas Oil, to power their operations due to Nigeria's unstable electricity grid. The global energy shock triggered by Middle East conflicts, involving Iran and disruptions in the Strait of Hormuz, has driven local fuel prices upward, significantly inflating production costs.
Data from MAN reveals a dramatic 65% increase in diesel depot prices, soaring from N970 to N1,600. This surge is particularly burdensome for factories dependent on diesel-powered generators, forcing them to allocate more resources to energy, thereby squeezing profit margins and operational efficiency.
Shipping Disruptions and Increased Logistics Expenses
Beyond energy, the disruption of the Strait of Hormuz, a vital global trade route, has resulted in longer shipping times and elevated freight charges. Global shipping firms, such as CMA CGM, have responded by implementing surcharges, including a $600 per twenty-foot equivalent unit (TEU) peak season fee on cargo from China to Nigeria.
Locally, haulage expenses have also climbed, with the cost of transporting a container from Apapa port to warehouses in Ikeja rising from approximately N450,000 to between N650,000 and N700,000. These increased logistics costs make importing raw materials more expensive, further straining manufacturers' financial health.
Impact on Key Industries and Economic Growth
MAN identified several sectors as hardest hit by these challenges, including:
- Chemicals and Pharmaceuticals: Vulnerable to global oil price fluctuations, with disruptions driving up costs of active pharmaceutical ingredients (APIs).
- Basic Metals, Iron, and Steel: Facing higher input costs due to energy and shipping surges.
- Food and Beverages: Experiencing increased production and transportation expenses.
Ajayi-Kadir warned that prolonged instability could lead to higher consumer prices, reduced competitiveness in export markets, and a threat to the sector's growth target of 3.1% in 2026. Recent data shows subdued performance, with manufacturing GDP growth at 1.13% year-on-year in Q4 2025, indicating a slowdown that could worsen if conditions persist.
Calls for Policy Response and Local Capacity Building
In response to these pressures, MAN has urged the federal government to adopt proactive measures to bolster the manufacturing sector against external shocks. Ajayi-Kadir emphasized the need to reduce reliance on imported raw materials and build local capacity, drawing lessons from past global crises to avoid policy failures and drive long-term industrial development.
This situation echoes broader concerns in Nigeria's economy, as petrol marketers have also called for relief measures to address rising fuel costs, highlighting the interconnected nature of energy and logistics challenges affecting various sectors.
