Market News

By Arinze Nwafor

Rising fuel prices driven by escalating tensions in the Middle East may disrupt Nigeria’s manufacturing sector and broader economy, with operators warning of mounting pressure on supply chains, production costs, and consumer prices.

The Manufacturers Association of Nigeria warned that surging fuel prices pose a significant risk to manufacturing operations, stressing that heavy reliance on trucks for logistics and generators for power makes the sector highly vulnerable to energy shocks.

The Lagos Chamber of Commerce and Industry also cautioned that Nigeria remains exposed to global oil market volatility, noting that any spike in crude prices would directly impact domestic fuel costs and the wider economy despite local refining efforts.

MAN noted that rising fuel prices, triggered by the conflict involving the United States, Israel, and Iran, including reported attacks on vessels along the Strait of Hormuz, could worsen inflationary pressures and disrupt supply chains nationwide.

In a telephone interview with The PUNCH, the Director-General of MAN, Segun Ajayi-Kadir, said the surge in fuel prices would have far-reaching consequences for manufacturers and the broader economy.

He stated, “Fuel is a major input in production, transportation, and energy supply, and it has a significant impact on the citizens and the whole sector of the economy. The recent hike in the prices of fuel as a result of the conflict in the Middle East has a negative implication on the Nigerian economy, including the manufacturing sector.”

Ajayi-Kadir stressed that manufacturers’ reliance on trucks for logistics makes them particularly vulnerable to fuel price increases, warning that distribution costs could surge and disrupt supply chains nationwide.

He explained, “Manufacturers depend on trucks for the movement of raw materials and finished products across the country. Increases in the price of fuel raise the transport fare, making distribution expensive and affecting the supply chain.”

The MAN DG further noted that rising fuel costs would significantly increase production expenses, as many manufacturers continue to depend on generators due to unreliable electricity supply.

He said, “The Nigerian manufacturing sector relies heavily on generators for production due to the inadequate supply of electricity over the years. The increase in fuel prices will increase the cost expended on power generation, thereby increasing the cost of production and reducing the profit margin.”

Ajayi-Kadir added that the higher cost burden would inevitably be transferred to consumers through increased prices of manufactured goods, worsening inflationary pressures, and weakening purchasing power.

He explained, “The extra cost will lead to an increase in the cost of finished products, thereby increasing the rate of inflation across the country, reducing the consumer purchasing power, and lowering the volume of sales of manufacturers’ products.”

He also warned that Nigerian manufacturers risk losing competitiveness to imported goods as production costs rise locally. “Whenever there is an increase in production cost in the country, Nigerian goods will be more expensive compared to their competitors. This will make imported goods cheaper, and as an alternative, consumers will shift their demand to foreign products, reducing the competitiveness and patronage of Nigerian products within and outside the country,” he said.

Ajayi-Kadir cautioned that small and medium-scale manufacturers could face severe strain, with some potentially forced to scale down operations or shut down entirely.

He stated, “The small and medium-scale manufacturers may find it difficult to cope with the fuel price increase, which may lead to reduced output or total shutdown of production. The multiplier effect will be slow industrial growth, an increase in unemployment rate, a reduction in revenue generation, and the contribution of the manufacturing sector to GDP.”

Energy prices in Nigeria have fluctuated since the full-scale attacks by the United States and Israel on Iran began on February 28, with the price of petrol exceeding N1,000 per litre on some days. Labour associations and organised private sector groups have, as a result, urged the government to provide relief to Nigerian consumers.

Meanwhile, The PUNCH reported that the landing cost of imported petrol is N94.53 cheaper than the domestic gantry price, citing the Major Energies Marketers Association of Nigeria. MEMAN disclosed that the landing cost of imported petrol as of 16 March 2026 stood at N1,080.47 per litre, while the domestic gantry price was N1,175 per litre, reflecting a N94.53 difference.

Also speaking, the President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, urged entrepreneurs to adopt survival strategies, including increased use of local inputs and expansion into export markets. Egbesola said, “The first thing is for us to begin to look inward, to look at how we can begin to use raw materials and how we can begin to use locally made inputs to replace imported ones.”

He maintained that boosting exports could help businesses earn foreign exchange and cushion the impact of inflation. “We can target doing more exports, and that is by becoming export-ready with our business. When there is inflation like this, it puts our products and services in a competitive position in the global markets. Our products are cheaper, so it makes it possible for us to sell more,” Egbesola added.

He further highlighted the need for alternative energy sources to reduce dependence on expensive fuel, stating, “Energy is one thing that is taking away a bulk sum of our profits. Sometimes up to 40 per cent of our profit margin is taken away by energy costs. So we can also begin to look at an alternative source of energy to power our businesses.”

The ASBON president also called for diversified funding options and government support through low-interest intervention funds. Egbesola said, “It is important for us to begin to look at other sources of funding beyond the commercial bank. The government too should release more intervention funds at a single-digit interest rate to help alleviate this time.”

On the broader oil market outlook, the Chairman of the Oil Producers Trade Sector of the Lagos Chamber of Commerce and Industry warned that Nigeria could face serious economic consequences if tensions in the Middle East disrupt crude shipments through the Strait of Hormuz and push global oil prices to $200 per barrel.

Speaking on behalf of Collins Ogbu, the sector’s chairman, the outgoing Managing Director of 11PLC, Adetunji Oyebanji, said Nigeria must urgently attract more investors into oil exploration and production to increase output and achieve its target of surpassing two million barrels per day.

His warning follows reports that Iran threatened to block oil shipments through the strategic Strait of Hormuz, a key route for global crude exports.

According to Iran’s Khatam al-Anbiya military command spokesperson, Ebrahim Zolfaqari, “We will never allow even a single litre of oil to pass through the Strait of Hormuz for the benefit of the US, the Zionists, and their partners.”

Oyebanji said a spike in global oil prices would directly affect Nigeria despite the presence of local refining capacity. “We all have to understand that one of the problems Nigeria has always had is that we always feel we are an island. We are not affected by what is happening in the global economy, and that is not the case. Everybody is affected, more so we are a monoproduct country,” Oyebanji said.

He explained that the country’s heavy reliance on crude oil revenues means any price shock in the international market will inevitably impact the local economy.

“So once crude goes to $200, by definition, even what it produces locally is going to go up. At the end of the day, if petrol or crude goes to $200, it is going to affect the price at the pump in Nigeria,” Oyebanji noted.

The energy executive also questioned claims that domestic refining alone would shield Nigeria from global price volatility. “Even when refining locally, it does not shield us from what is happening with international crude prices. If it is 100 barrels we have to sell, let us sell it in dollars and maximise dollar revenue for the country,” Oyebanji remarked.

He warned that Nigeria’s crude production should already be far higher than current levels if sufficient investments had been made in exploration.

“Nigeria today should even have been at four million barrels. But to achieve that, you have to invest in exploration and production, and the people that have the financial muscle are the international oil companies,” Oyebanji said.

He added that Nigeria must improve security, attract large-scale investment, and implement policies that encourage exploration if the country hopes to increase output and cross the two-million-barrel production threshold.