Manufacturers Raises Concern On Geopolitical Tensions’ Impact On Nigeria’s Manufacturing Sector

The Manufacturers Association of Nigeria (MAN) has expressed concern over the potential impact of the escalating military confrontations in the Middle East on the country’s manufacturing sector as possible disruptions to global shipping routes, volatile energy markets, and supply chain bottlenecks.

MAN noted, “its vigilance regarding the escalating military tensions involving the United States, Israel, and Iran. These events have significant implications for the global macroeconomic landscape, which can indirectly impact Nigeria.”

The director-general of MAN, Segun Ajayi-Kadir expressed that this situation arises at a pivotal moment when Nigeria has seen its annual inflation rate positively ease to 15.10 percent, and manufacturing capacity utilization has begun to exceed the 60 percent mark, saying however, the current geopolitical turbulence poses challenges that require careful navigation to protect the economic progress achieved.

“Although these conflicts are occurring far from our shores, their economic consequences may directly influence the Nigerian economy.

“We are particularly attentive to issues surrounding global shipping disruptions, fluctuating energy markets, and potential supply chain bottlenecks that could challenge local production,” Ajayi-Kadir stated.

Ajayi-Kadir further explained that the recent hostilities in the Middle East are reshaping the global energy and logistics environment.

“With critical disruptions in the Strait of Hormuz, the global markets have become unsettled, reflected in rising Brent crude prices exceeding $84.50 per barrel, and increased global freight and war-risk insurance premiums as vessels seek safer routes,” he stated.

For Nigerian manufacturers, MAN DG added that the implications of these developments are immediate and significant, increasing production costs, saying that historically, disruptions in the U.S. and the Middle East have reverberated throughout the global economy, and Nigeria is no exception.

He noted that “while a rise in global oil prices could theoretically benefit Nigeria by bolstering foreign exchange reserves and contributing to the stability of the Naira, the current reality presents a complex challenge. Nigeria’s domestic crude production hovers around 1.3 to 1.4 million barrels per day due to ongoing structural challenges, limiting the ability to fully leverage potential gains.”

He disclosed that in terms of trade relations, the United States remains one of Nigeria’s most vital partners, stating that given the existing conflict, disruptions in this crucial trade relationship could lead to increased costs for global freight forwarding and longer lead times for imported raw materials, potentially resulting in imported inflation.

According to him, the manufacturing sector is poised to face a variety of immediate and complex challenges, including rising energy costs, which are particularly relevant given that manufacturers depend heavily on gas and diesel for effective operations.

“Additionally, increasing freight costs and longer shipping times are making it more expensive to procure raw materials. Furthermore, heightened costs for essential goods could diminish consumer purchasing power, presenting manufacturers with the challenge of rising production costs amid stagnant or declining sales.”

In identifying the sectors most likely to be affected, MAN emphasized that the impact of global conflicts is not uniformly distributed, adding that “while the entire real sector is likely to feel the pressure, specific groups such as the Chemical and Pharmaceuticals Sector and the Basic Metals, Iron, and Steel Sector may encounter unique challenges.