Market Update: Middle East conflict sends Nigerian business costs soaring – Full Analysis

Rising tensions involving the United States, Israel, and Iran are already hitting Nigerian businesses, pushing up costs for energy, raw materials, and foreign exchange. Firms that rely on imported inputs are seeing price spikes that threaten both production and profit margins.

Patrick Ajah, managing director of May & Baker Nigeria Plc, said the impact is visible within weeks, particularly on pharmaceutical products. “The price of paracetamol raw materials has jumped from $2.90 per kilogram to $5.90 after negotiations, a rise of about 103 percent,” he said, noting that volatility in global markets hits local firms directly due to their reliance on imported active ingredients.

Energy costs are also under strain. Yusuf Binji, managing director and CEO of BUA Cement Plc, said energy remains a central part of production expenses. “The impact of energy on the cost of production can’t be overemphasized,” he said, highlighting how rising diesel prices and power challenges are forcing firms to adjust operations and pricing quickly.

Oil market disruption and diesel costs

The Strait of Hormuz, which carries about 20 percent of global oil supply, is under disruption, with analysts projecting crude oil could reach $150 per barrel. This has direct implications for firms that depend on diesel to fill gaps in electricity supply.

Nigeria, Africa’s most populous nation, has already recorded significant increases in pump prices. Dangote Petroleum Refinery, the country’s largest private refinery, has repeatedly adjusted ex-depot prices, with the latest hike pushing the gantry price of petrol to N1,245 per litre, while Automotive Gas Oil (AGO), or diesel, has also increased.

Before the escalation in the Middle East, petrol sold for between N840 and N900 per litre ($0.56–$0.60), underscoring how quickly global developments are affecting the domestic market.

The Manufacturers Association of Nigeria (MAN) described the conflict as a geopolitical shock whose economic shrapnel directly hit Nigerian factory floors through higher energy costs, disrupted shipping routes, and worsening foreign exchange pressures.

The warning comes at a time when Nigeria appeared to be clawing back some macroeconomic stability. Annual inflation had eased to 15.06 percent, and manufacturing capacity utilisation had risen above 60 percent. MAN, now fears these gains could be reversed.

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Sector exposure

MAN said that while the entire real sector will be affected, chemicals and pharmaceuticals, basic metals, and food and beverage firms are among the most exposed. In 2023, chemical products accounted for about 88 percent ($136.45 million) of Nigeria’s total manufactured exports to the United States, which stood at $154.11 million.

The group noted that dependence on petrochemical derivatives and imported active pharmaceutical ingredients exposes firms to rising costs and export risks.

Basic metal, iron, and steel operations face pressure due to energy use, while food, beverage, and tobacco firms are affected by imported grains and packaging materials, with freight costs expected to reflect in consumer prices. These cost pressures are not staying on paper, they are already shaping the prices consumers see on shelves and in cement yards across the country.

Prices and production

Data compiled by BusinessDay show that 17 of the largest firms on the Nigerian Exchange recorded a combined N7.59 trillion in input costs as of December 2025, representing a 15.2 percent increase from the previous year.

Cement manufacturers spent over N1.1 trillion on energy alone, with BUA and Dangote each seeing energy eat up 42 percent of their production costs. Lafarge Africa is implementing waste-to-energy and compressed natural gas transport initiatives as part of its cost structure adjustments.

Cement makers in Nigeria have implemented significant price hikes in early 2026, with prices for a 50kg bag rising to between N11,000 and N15,000 in March, up from N9,500–N10,000 last year. Brewers have also adjusted prices.

Nigerian Breweries Plc announced price increases on selected products, including Star Lager, Gulder, Heineken, Legend Stout, and Maltina, effective March 20, 2026. The company said the adjustment follows increases in operational and input costs.

Guinness Nigeria Plc also notified distributors of price changes on selected products effective March 27. Data show that four listed brewers, Nigerian Breweries, Guinness Nigeria, International Breweries, and Champion Breweries, spent a combined N1.83 trillion in 2025, up from N1.47 trillion in 2024.

In 2020, the figure was slightly above N400 billion, indicating a steady rise in production costs over five years.

Samuel Oyekanmi, research and insight lead at Abuja-based consultancy Norrenberger, said the tripling of production costs in half a decade represents “profitless growth,” where top-line revenue looks impressive but is being absorbed by a higher-cost environment.

“Even with a relatively stable naira, the industry is engaged in a multi-front war. Several factors impact this, such as high input costs, the lingering effect of previous exchange rate devaluations, and a surge in energy prices,” he said.

“I would expect that these businesses have a way of transmitting the cost to the consumers in a bid to remain profitable.”