Manufacturers’ Association Highlights Potential Devastation from Middle East Conflict
The Manufacturers Association of Nigeria (MAN) has expressed concern over the potential repercussions of the ongoing US-Iranian crisis on Nigeria’s manufacturing sector. In a comprehensive position paper recently released, MAN highlighted how escalating geopolitical tensions in the Middle East could undermine Nigeria’s recent macroeconomic gains, including eased inflation and increased capacity utilisation.
MAN’s statement underscores the organisation’s vigilance in monitoring global events that threaten Nigeria’s economic stability. The association noted, “The recent escalation of military confrontation involving the United States, Israel and Iran has undeniably sent shockwaves across the global macroeconomic landscape. As the leading voice for domestic wealth creators, it is our duty to analyse global geopolitical shifts through the lens of local industrial survival.”
Despite Nigeria’s macroeconomic progress, including inflation falling to 15.10% and manufacturing capacity utilisation rising above 60%, MAN cautioned that the geopolitical upheaval could reverse these gains. The organisation warns of potential disruptions to global shipping routes, volatile energy markets, and supply chain bottlenecks that could severely impact local manufacturing.
Global Instability and Local Impact
The intensification of hostilities in the Middle East has significantly altered the global energy and logistics environment. With the Strait of Hormuz facing potential disruptions, Brent crude oil prices have surged past $84.50 per barrel, while shipping costs and war-risk insurance premiums have increased sharply as vessels reroute away from the Red Sea corridor.
For Nigeria, the implications are tangible. MAN explained that “when the US and Middle East sneeze, the global economy catches a cold, and the Nigerian economy is not an exception.” While higher oil prices could theoretically bolster Nigeria’s foreign exchange reserves, the country’s limited crude production—hovering around 1.3 to 1.4 million barrels per day—means Nigeria benefits only from price increases, not volume gains. This paradox, MAN warns, could impair Nigeria’s fiscal stability.
The organisation also detailed the risks to Nigeria’s bilateral trade with the US, which stood at approximately $5.91 billion in 2024, representing 9.3% of total exports, and imports valued at $4.33 billion. MAN projected that the conflict could lead to increased freight costs, longer lead times for imports, and imported inflation—pressures that threaten to erode consumer purchasing power and escalate production costs.
Immediate and Sector-Specific Risks
The manufacturing sector faces multifaceted threats, including:
– Energy Cost Escalation: Rising global energy prices are pushing up domestic gas and diesel prices, squeezing operating margins.
– Imported Inflation & Freight Costs: Increased shipping costs and delays threaten the affordability of raw materials.
– Demand Destruction: Rising costs of essential goods are reducing consumer demand, leading to surplus inventory and threatening future growth targets.
Certain sectors are particularly vulnerable. The chemicals and pharmaceuticals sector, which exported approximately 88% of Nigeria’s manufactured exports to the US in 2023, faces imminent risks from crude oil price shocks impacting the cost of active pharmaceutical ingredients and chemical base materials. Similarly, energy-dependent sectors like iron and steel, as well as food and beverages reliant on imported grains and packaging materials, are on the frontline of the fallout.
Lessons from Past Conflicts
MAN drew parallels with the impact of the US-Iraq war in the early 2000s, where Nigeria’s manufacturing exports plummeted from $901.35 million in 2002 to just $496.87 million in 2003. The sector’s contribution to GDP also contracted sharply, underscoring the need for proactive measures.
A Call for Urgent Action
The association emphasised that Nigeria’s vulnerability to external shocks stems from a heavily import-dependent manufacturing base. MAN urged the government to adopt immediate, strategic measures to mitigate potential damage, including fast-tracking energy transition initiatives, securing foreign exchange for critical imports, domestically refining petroleum products, and halting logistics levies to ease transportation costs.
In closing, MAN stated, “The window for reactive measures is closed; the time for proactive manufacturing fortification is now. We must use this crisis as a catalyst for genuine manufacturing autonomy.”