Mideast turmoil: Companies producing chemicals and medications face greatest danger — report by MAN

The Manufacturers Association of Nigeria (MAN) has sounded the alarm over the escalating military confrontation between the United States, Israel, and Iran, cautioning that Nigeria's chemical and pharmaceutical manufacturers are at the greatest risk as global economic shocks reverberate throughout the industrial sector.

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According to Segun Ajayi-Kadir, Director General of MAN, the intensifying Middle East crisis has sent shockwaves across the global macroeconomic landscape, threatening to reverse recent gains in Nigeria's economy, including a moderation in inflation to 15.10 per cent and improved manufacturing capacity utilisation above 60 per cent.

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MAN's Director General noted that global geopolitics has become a significant cost driver for Nigerian manufacturers, stating that "when the US and Middle East sneeze, the global economy catches a cold, and Nigeria is not an exception."

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Despite rising global crude oil prices, which have recently hovered around $84 per barrel, Nigeria is expected to gain little due to its weak production output, estimated to be between 1.3 and 1.4 million barrels per day.

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This creates a paradox where the country benefits from price gains but loses out on volume-driven revenue, limiting foreign exchange inflows, according to MAN.

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The crisis also poses a threat to Nigeria's trade relations with the United States, one of its key partners, with Nigeria's exports to the US standing at $5.91 billion in 2024, representing 9.3 per cent of total exports, while imports were valued at $4.33 billion.

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MAN warned that disruptions in global logistics and Middle Eastern transit routes could trigger higher freight costs, longer delivery timelines, and imported inflation, further exacerbating the challenges faced by Nigerian manufacturers.

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The strengthening of the US dollar amid a global flight to safe-haven assets is already exerting renewed pressure on the naira, with consequences that will be felt directly on factory floors, according to the Association.

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Sectoral analysis by MAN revealed that the Chemical and Pharmaceutical group is the most vulnerable, with chemical products accounting for about 88 per cent of Nigeria's manufactured exports to the US in 2023.

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Rising costs of Active Pharmaceutical Ingredients (APIs) and other inputs could erode margins and threaten export competitiveness, while the Basic Metal, Iron and Steel sector faces mounting operational costs due to its heavy dependence on energy.

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The Food, Beverage and Tobacco segment is also expected to grapple with imported inflation on grains and packaging materials, according to MAN's analysis.

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MAN warned that manufacturers now face a dual challenge of rising production costs and weakening demand, which could derail the sector's projected 3.1 per cent growth in 2026.

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According to MAN, "the time for reactive measures is over" and Nigeria must proactively fortify its manufacturing base to withstand external shocks.