Nigeria’s Manufacturing Sector Faces Pressure Amid Rising Diesel Prices and Shipping Costs
Nigeria’s manufacturing industry is grappling with significant challenges as diesel prices and global shipping costs surge, largely due to the geopolitical tensions in the Strait of Hormuz and attacks on energy infrastructure. This precarious situation is compounding existing pressures, as manufacturers continue to deal with increasing input costs.
Experts warn that unless the conflict in Iran comes to a swift resolution, the current sense of urgency will likely diminish while market prices continue to climb. The effects of the ongoing crisis are immediate and extensive, according to Segun Ajayi Kadir, the Executive Director of the Manufacturers Association of Nigeria (MAN), who expressed his concerns in a recent memo.
Kadir highlighted that manufacturers heavily depend on diesel and gas for their operations, primarily due to the unreliability of Nigeria’s electricity supply. He noted that the global energy crisis spurred by the conflict in Iran has led to an uptick in domestic pump and storage prices, complicating matters further for local manufacturers.
The closure of the Strait of Hormuz, a vital trade route for oil and energy products, has escalated transportation costs and increased transit times, making it prohibitively expensive for manufacturers to source raw materials. Kadir cautioned that if the conflict persists, the resultant economic shock will damage operating margins across manufacturing sectors. Currently, manufacturers are confronted with the dual challenges of rising production costs and growing inventories of unsold goods, threatening their objective of achieving a 3.1% growth rate by 2026.
Diesel prices have surged by 65%, climbing from 970 naira to 1,600 naira per litre, intensifying operational expenses for factories reliant on diesel generators. Furthermore, shipping costs have also risen sharply, with CMA CGM, one of the world’s largest shipping companies, imposing a peak season surcharge of $600 per TEU on all shipments from China to Nigeria, exacerbating the already strained logistics landscape. A recent investigation revealed that transporting a container from Apapa port to a warehouse in Ikeja has increased from approximately 450,000 naira to between 650,000 and 700,000 naira.
The chemicals, pharmaceuticals, basic metals, steel, and food and beverage sectors have experienced the most acute impacts, according to Kadir. He explained that petrochemical derivatives are particularly vulnerable to fluctuations in oil prices, leading to immediate increases in the costs of active pharmaceutical ingredients (APIs) and chemical base materials. This inflationary pressure threatens profit margins and undermines the competitive edge of industrial operators in these sectors.
Highlighting Nigeria’s vulnerability to external shocks, Kadir emphasized the necessity for the country to enhance its domestic policy responses. While it may be impossible to control geopolitical tensions, proactive measures must be taken to strengthen the manufacturing sector. He pointed out the missed economic opportunities, noting that if global oil prices were to rise to $100 per barrel, it could potentially bolster Nigeria’s foreign exchange reserves and stabilize the naira. However, chronic underproduction in the oil sector means Nigeria largely misses out on these benefits.
Kadir urged the federal government to learn from historical precedents, cautioning against repeating the mistakes of the early 2000s when Nigeria squandered an oil boom. He emphasized that the current crisis could serve as a catalyst for fostering genuine manufacturing independence if managed correctly. With the real GDP growth rate of the manufacturing sector registering a modest 1.13% in the fourth quarter of 2025—a decline from previous periods—the need for strategic interventions has never been more pressing.
