Photo caption: MAN logo
By Charles Okonji
The Manufacturers Association of Nigeria (MAN) has lamented that the current US Iranian war in the Middle East has negatively affected manufacturers across all subsectors.
This was contained in a paper entitled “Position of the Manufacturers Association of Nigeria (MAN) on the Implications of the US-Iranian Crisis.”
According to the paper, MAN has closely monitored the recent escalation of military confrontation involving the United States, Israel and Iran, as the conflict has undeniable sent shock-waves across the global macroeconomic landscape.
Regrettably, MAN noted that the war is coming at a time when Nigeria’s annual inflation had encouragingly eased to 15.10% and manufacturing capacity utilization had begun to climb back above the 60% threshold; stressing that sudden geopolitical shock could reverse the hard-won macroeconomic gains.
“We recognize that while this geopolitical crisis is unfolding thousands of miles away, its economic shrapnel threatens to strike the heart of the Nigerian economy through disruptions to global shipping routes, volatile energy markets and supply chain bottlenecks that present an imminent threat to domestic production.
“The intensification of hostilities in the Middle East has fundamentally altered the global energy and logistics landscape. With the strategic Strait of Hormuz facing severe disruptions, global markets have panicked. Brent crude has rapidly surged past the $84.50 per barrel mark, while global freight and war-risk insurance premiums have skyrocketed as vessels reroute away from the Red Sea corridor.
“For the Nigerian manufacturer, global geopolitics is no longer a television spectacle; it is a direct tax on the cost of production. Indeed, when the US and Middle East sneeze, the global economy catches a cold and the Nigerian economy is not an exception.
“In economic theory, a spike in global oil prices to $84 per barrel should be a fiscal windfall for Nigeria, boosting our foreign exchange (FX) reserves and stabilizing the Naira towards our projected 2026 threshold of N1,300/$. However, reality presents a stark macroeconomic paradox. As domestic crude production remains severely suboptimal (hovering around 1.3 to 1.4 million barrels per day due to persistent structural deficits), Nigeria captures only the price gains while missing out entirely on the volume gains.” MAN averred.
The paper also pointed out that United States remains one of Nigeria’s most vital bilateral trading partners, stating that in a recent data, Nigeria’s total exports to the US in 2024 stood at $5.91 billion, accounting for 9.3% of our $63.6 billion total exports, while Nigeria’s imports from the US totaled $4.33 billion in the same period.
“For the manufacturing sector, the implications are immediate, severe and multifaceted: Energy Cost Escalation: Manufacturers heavily rely on gas and Automotive Gas Oil (diesel) to power operations. The global energy shock is driving domestic pump and depot prices upward, wiping out operating margins.
“Imported Inflation & Freight Costs: Extended transit times and multiplied shipping costs are making raw material procurement prohibitively expensive.
Demand Destruction: As the cost of staple goods rises, consumer purchasing power collapses. Manufacturers now face the dual threat of soaring production costs and rapidly accumulating unsold inventories, jeopardizing our target of achieving a 3.1% real growth rate for the sector in 2026.
“A rising tide of global conflict does not sink all ships equally; some sectors are fundamentally more exposed. While the entire real sector will feel the pinch, specific Sectoral Groups within MAN face existential headwinds:
“The Chemical and Pharmaceuticals Sector is at the highest risk. In 2023, out of the $154,107,280 total Nigerian manufactured exports to the US, chemical products alone accounted for a staggering $136,446,180 (approximately 88%). Petrochemical derivatives are highly sensitive to crude oil price shocks.
“Any disruption in global petroleum markets will immediately inflate the cost of APIs (Active Pharmaceutical Ingredients) and chemical base materials, squeezing margins and threatening the export dominance of operators within the Sectoral Group.” The position paper reads.
MAN also revealed that heavily energy-dependent sector relies on stable domestic gas and diesel pricing, explaining that the global crisis trigger local energy price surges, the operational expenditure for these manufacturers will become unsustainable.
The paper also stated that Food, Beverage and Tobacco Sector highly depend on imported grains and packaging materials, adding that the sector will face severe imported inflation, which will further escalate freight costs, will force price hikes, directly impacting the Nigerian consumer’s daily survival.
Drawing lessons from Echoes of the Past, MAN noted the US-Iraq War showed that Nigeria does not have to guess the impact of Middle Eastern conflicts involving the US; saying that we only need to look at the data from the US-Iraq War.
“The immediate fallout on Nigeria’s manufacturing sector was devastating:
Total Manufacturing Exports plummeted from $901.35 million in 2002 to a dismal $496.87 million in 2003.
“Manufacturing GDP Growth suffered a violent contraction, collapsing from a robust 17.74% in 2002 to -10.8% in 2003.
Manufacturing’s Contribution to GDP consequently dropped from 11.68% to 9.7% within that same one-year window.
“The US-Israel-Iran conflict is a stark reminder of Nigeria’s vulnerability to external shocks so long as our manufacturing base remains heavily reliant on imported raw materials. We cannot control the geopolitics of the Gulf, but we can and must, control our domestic policy responses.
“The window for reactive measures is closed; the time for proactive manufacturing fortification is now.
We can either follow the failed path of early 2000s, where we squandered an oil boom while our factories rotted, or we can use this crisis as a catalyst for genuine manufacturing autonomy.
“Specific & Practical Recommendations
To insulate the Nigerian economy and prevent widespread factory closures, MAN urgently recommends the following immediate interventions by the Federal Government: “Fast-Track Energy Transition for Industry: Immediately scale and subsidize the Presidential CNG (Compressed Natural Gas) initiative specifically tailored for manufacturing hubs and heavy-duty logistics to break the sector’s reliance on imported diesel.
“Guarantee FX for Critical Inputs: The Central Bank of Nigeria (CBN) must establish a dedicated, prioritized FX window for manufacturers importing critical raw materials and machinery, insulating them from speculative volatility.
“Domesticate Petroleum Supply Chains: Enforce a framework that compels domestic mega-refineries to prioritize the sale of refined fuels and petrochemicals to local manufacturers at discounted, non-import-parity rates.
“Suspend Logistics & Haulage Levies: To buffer the shock of rising transportation costs, all levels of government must enact an immediate, six-month moratorium on discretionary highway levies, haulage taxes and multiple transit tolls that currently burden the distribution of manufactured goods.” The position paper emphasized.
