US-Iranian Crisis: MAN urges FG to compel refineries to sell fuels at discounted, non-import-parity rates to manufacturers

To insulate the Nigerian economy and prevent widespread factory closures as a result of dire economic implications of the US-Iranian conflict, the Manufacturers Association of Nigeria (MAN) has urgently urged the Federal Government to enforce a framework compelling domestic mega-refineries to prioritize the sale of refined fuels and petrochemicals to local manufacturers at discounted, non-import-parity rates.

MAN also urged the Federal Government to immediately scale and subsidize the Presidential CNG (Compressed Natural Gas) initiative specifically tailored for manufacturing hubs and heavy-duty logistics to break the sector’s reliance on imported diesel.

It added that the Central Bank of Nigeria (CBN) must establish a dedicated, prioritized FX window for manufacturers importing critical raw materials and machinery, insulating them from speculative volatility.

To buffer the shock of rising transportation costs, all levels of government must enact an immediate, six-month moratorium on discretionary highway levies, haulage taxes and multiple transit tolls that currently burden the distribution of manufactured goods.

The Manufacturers Association of Nigeria gave this advice in a position paper, explaining the possible impacts of the geoeconomic fallout of this conflict and our strategic blueprint for navigating it.

The paper is titled “Position of the Manufacturers Association of Nigeria on the Implications of that US-Iranian Crisis for the Manufacturing Sector.”

 MAN postulated that the US-Iranian conflict could reverse the hard-won macroeconomic gains in the country, coming at a time when the nation’s annual inflation had encouragingly eased to 15.10% and manufacturing capacity utilization had begun to climb back above the 60% threshold.

Recognizing that this geopolitical crisis is unfolding thousands of miles away, MAN noted that its economic shrapnel threatens to strike the heart of the Nigerian economy through disruptions to global shipping routes, volatile energy markets and supply chain bottlenecks that present an imminent threat to domestic production.

The MAN maintained that the global geopolitics is no longer a television spectacle but a direct tax on the cost of production as  when the US and Middle East sneeze, the global economy catches a cold and the Nigerian economy is not an exception.

It noted that a spike in global oil prices to $84 per barrel should be a fiscal windfall for Nigeria, boosting our foreign exchange (FX) reserves and stabilizing the Naira towards our projected 2026 threshold of N1,300/$. “However, reality presents a stark macroeconomic paradox. As domestic crude production remains severely suboptimal (hovering around 1.3 to 1.4 million barrels per day due to persistent structural deficits), Nigeria captures only the price gains while missing out entirely on the volume gains.

“The United States remains one of Nigeria’s most vital bilateral trading partners. According to recent data, Nigeria’s total exports to the US in 2024 stood at $5.91 billion, accounting for 9.3% of our $63.6 billion total exports. Conversely, our imports from the US totaled $4.33 billion in the same period.

“The current conflict severely threatens this bilateral trade flow. We anticipate immediate spikes in global freight forwarding costs, prolonged lead times for imported raw materials and an imported inflation surge. With the Middle Eastern transit corridors severely compromised, the cost of securing inputs for Nigerian factories will inevitably rise, threatening to erode the already fragile purchasing power of the Nigerian consumer. Also, the global flight to safe-haven assets has strengthened the US dollar, applying renewed depreciation pressure on our currency. The adverse ripple effects of these could arrive squarely on our factory floors,” said MAN.

While admitting that some of its sectoral groups would be badly affected, the Association averred that the implications of the crisis for the manufacturing sector would be immediate, severe and multifaceted.

Energy Cost Escalation: 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 margins.

Imported Inflation & Freight Costs: Extended transit times and multiplied shipping costs are making raw material procurement prohibitively expensive.

Demand Destruction: As the cost of staple goods rises, consumer purchasing power collapses. Manufacturers now face the dual threat of soaring production costs and rapidly accumulating unsold inventories, jeopardizing our target of achieving a 3.1% real growth rate for the sector in 2026.

A rising tide of global conflict does not sink all ships equally; some sectors are fundamentally more exposed. While the entire real sector will feel the pinch, specific Sectoral Groups within MAN face existential headwinds:

Chemical and Pharmaceuticals Sector: This group is at the highest risk. In 2023, out of the $154,107,280 total Nigerian manufactured exports to the US, chemical products alone accounted for a staggering $136,446,180 (approximately 88%). Petrochemical derivatives are highly sensitive to crude oil price shocks. Any disruption in global petroleum markets will immediately inflate the cost of APIs (Active Pharmaceutical Ingredients) and chemical base materials, squeezing margins and threatening the export dominance of operators within the Sectoral Group.

Basic Metal, Iron and Steel Sector: This heavily energy-dependent sector relies on stable domestic gas and diesel pricing. Should the global crisis trigger local energy price surges, the operational expenditure for these manufacturers will become unsustainable.

Food, Beverage and Tobacco Sector: Highly dependent on imported grains and packaging materials, this sector will face severe imported inflation. Escalating freight costs will force price hikes, directly impacting the Nigerian consumer’s daily survival.

Lessons from Echoes of the Past: The US-Iraq War Retrospective

We do not have to guess the impact of Middle Eastern conflicts involving the US; we only need to look at the data from the US-Iraq War. The immediate fallout on Nigeria’s manufacturing sector was devastating:

Total Manufacturing Exports plummeted from $901.35 million in 2002 to a dismal $496.87 million in 2003.

Manufacturing GDP Growth suffered a violent contraction, collapsing from a robust 17.74% in 2002 to -10.8% in 2003.

Manufacturing’s Contribution to GDP consequently dropped from 11.68% to 9.7% within that same one-year window.

Concluding, the Association said “The US-Israel-Iran conflict is a stark reminder of Nigeria’s vulnerability to external shocks so long as our manufacturing base remains heavily reliant on imported raw materials. We cannot control the geopolitics of the Gulf, but we can and must, control our domestic policy responses. The window for reactive measures is closed; the time for proactive manufacturing fortification is now.

“We can either follow the failed path of early 2000s, where we squandered an oil boom while our factories rotted, or we can use this crisis as a catalyst for genuine manufacturing autonomy.”