MAN warns US-Iran crisis could derail Nigeria’s manufacturing recovery

THE Manufacturers Association of Nigeria (MAN) has raised concerns over the escalating conflict involving the United States, Israel and Iran, warning that the geopolitical crisis could reverse Nigeria’s recent macroeconomic gains and destabilise the manufacturing sector.

In a position paper released on Friday, the association said the intensifying hostilities in the Middle East have already sent shockwaves across global energy markets and supply chains, posing significant risks to domestic production in Nigeria. The group noted that the crisis comes at a time when inflation had eased to 15.10 percent and manufacturing capacity utilisation had begun to recover above 60 percent.

MAN described the conflict as a distant geopolitical event with immediate local consequences, stressing that disruptions to global shipping routes, rising energy prices and supply chain bottlenecks could significantly increase the cost of production for Nigerian manufacturers.

The association pointed to the strategic Strait of Hormuz and Red Sea shipping corridor, where disruptions have triggered a surge in global freight costs and war-risk insurance premiums. Brent crude prices have also climbed above $100 per barrel, further compounding cost pressures for manufacturers reliant on energy inputs such as diesel and gas.

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Despite higher oil prices typically benefiting oil-exporting countries like Nigeria, MAN highlighted a ‘macroeconomic paradox,’ noting that the country’s low crude production levels, hovering between 1.3 million and 1.4 million barrels per day, mean it is unable to fully capitalise on the price surge.

The association also warned that Nigeria’s trade relationship with the United States could come under strain. Nigeria exported goods worth $5.91 billion to the US in 2024, accounting for 9.3 percent of total exports, while imports stood at $4.33 billion. According to MAN, the ongoing crisis threatens to disrupt this trade flow through increased shipping costs, longer delivery timelines and rising import prices.

“These pressures will translate into imported inflation and renewed depreciation of the naira, as global investors flock to safe-haven assets like the US dollar,” the association said.

MAN outlined several immediate implications for manufacturers, including escalating energy costs, higher freight expenses and weakening consumer demand. It warned that rising prices for basic goods could erode purchasing power, leaving manufacturers with unsold inventory and threatening the sector’s projected 3.1 percent growth in 2026.

The association identified key sectors most vulnerable to the crisis. The chemical and pharmaceutical sector faces the highest risk due to its heavy reliance on petrochemical inputs, which are sensitive to global oil price movements. Similarly, the basic metal, iron and steel sector could see operational costs spike due to its dependence on energy, while the food, beverage and tobacco sector is likely to face imported inflation from higher costs of grains and packaging materials.

“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 margin,” MAN said.

Drawing parallels with the early 2000s, MAN recalled the impact of the US-Iraq War on Nigeria’s manufacturing sector, when exports fell sharply from $901.35 million in 2002 to $496.87 million in 2003, and sectoral GDP growth plunged from 17.74 percent to -10.8 percent.

The association warned that a similar outcome could occur if proactive measures are not taken, stressing that Nigeria remains vulnerable to external shocks due to its reliance on imported raw materials.

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To mitigate the impact, MAN called on the federal government to implement urgent policy interventions. These include accelerating the adoption of compressed natural gas (CNG) for industrial use, creating a dedicated foreign exchange window for manufacturers, prioritising local supply of refined petroleum products and petrochemicals, while temporarily suspending logistics and haulage levies.

“The time for reactive measures is over. Nigeria must act decisively to protect its manufacturing base and prevent widespread factory closures,” the association said.

MAN added that the current crisis presents an opportunity for Nigeria to strengthen its industrial capacity and reduce dependence on imports, rather than repeating past mistakes during previous global oil shocks.