Manufacturers Warn Of Higher Prices As Energy Costs Surge

Nigeria’s manufacturing sector is facing mounting pressure from rising fuel costs and persistent power instability, with industry leaders warning of imminent increases in production costs and consumer prices if urgent interventions are not implemented.

Managing director and chief executive officer of Coleman Technical Industries Ltd, Mr George Onafowakan, who raised the alarm in an exclusive interview with LEADERSHIP, noted that erratic electricity supply remains a structural challenge that continues to undermine industrial productivity.

According to him, manufacturers in Nigeria have long adapted to unreliable grid power by investing heavily in alternative energy sources.

“No factory in Nigeria is built without factoring in alternative power, whether diesel or gas generators. Every manufacturer effectively operates as its own local authority when it comes to power supply,” he said.

Findings across major industrial zones reveal a sector heavily dependent on diesel-powered generators, with factories running at high energy costs to sustain operations. Engineers and technical teams now work around the clock to monitor fuel consumption and prevent disruptions that could halt production lines.

Onafowakan stressed that power outages routinely stall factory operations, placing manufacturers under intense pressure to meet delivery timelines.

“When the lights go off, everything stops. We rely on generators, but the costs are rising, and there is constant uncertainty about meeting production targets,” he added.

The recent surge in global fuel prices, driven by geopolitical tensions, is compounding the challenge. While some manufacturers have temporarily absorbed the increases, Onafowakan warned that the full impact could materialise within the next three to four months.

“By the second quarter, businesses may be forced to make difficult decisions around production planning and pricing,” he said.

He noted that small and medium-scale manufacturers are particularly vulnerable, lacking the financial buffers required to sustain rising operating costs while meeting payroll and fulfilling orders.

Beyond individual firms, the impact is already rippling across supply chains. Production delays are affecting dependent businesses and, ultimately, consumers, who are likely to face higher prices for goods.

Despite the growing pressure, Onafowakan said widespread layoffs or major operational restructuring may not occur immediately but cautioned that the situation could deteriorate without timely intervention.

He called on the government to move beyond subsidy debates and implement practical support measures aimed at sustaining production and protecting jobs.

Recommended interventions, he said, include tariff adjustments, tax reliefs, and targeted support for manufacturers grappling with escalating energy costs.

“Subsidies are no longer the issue; the focus should now be on palliatives that can sustain production and safeguard employment,” he stated.

Similarly, the chairman of the Lagos Chapter of the National Association of Small-Scale Industries (NASSI), Mrs Gertrude Akhimien, warned that the impact of rising fuel prices will extend beyond manufacturing to the broader economy.

She explained that higher transportation costs for raw materials and finished goods, as well as increased commuting expenses for workers, will significantly raise operational overheads.

“The cost of warehousing, distribution, and logistics will increase, putting additional pressure on already thin profit margins, particularly in low-margin sectors,” she said.

Akhimien added that businesses would have little option but to transfer rising costs to consumers.

“This will inevitably lead to higher prices of goods in the market, as businesses pass on increased production and logistics costs,” she noted.

She also called for urgent government intervention to cushion the impact on small and medium enterprises and other critical sectors.

Proposed measures include targeted subsidies for essential industries, tax reductions on key services, and financial support for struggling businesses.

According to her, temporary tax waivers on essential goods and the transport sector could help reduce the cost of moving goods, while grants and subsidies for micro, small, and medium enterprises would provide critical relief until global energy markets stabilise.

Industry stakeholders warn that without swift and practical policy responses, Nigeria risks a cycle of rising production costs, higher consumer prices, and deepening instability in its manufacturing sector.