Consumers face price hikes as manufacturers’ stockpiles deplete

Nigerian manufacturers are burning through stockpiles of raw materials, which have allowed them to maintain production at moderate costs for price-averse customers after the unprecedented war in the Middle East drove up input costs. They say that if the war does not end soon, the current caution will give way to higher market prices.

“We are only seeing the signs of its impact,” said Segun Ajayi, secretary-general of the Manufacturers Association of Nigeria. “The time that we start to see the heightened impact is when the current stocks run out.”

The pressure is building. After weeks of in-fighting between the United States, Israel and Iran led to the closure of key trade routes for commodity and energy products, shipping times have stretched, freight costs have climbed, and oil-linked inputs are edging higher.

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Recently, CMA CGM, one of the world’s biggest shipping companies, announced a “Peak Season Surcharge” of $600 per TEU until further notice on all cargo to Nigeria from China, its biggest import partner for raw materials. Only one of a myriad of new price announcements.

The situation feeds into logistics as haulage expenses grow. Samson Oyejide, a logistics manager, told BusinessDay that trucking rates from ports have risen in some cases, driven by higher diesel prices and persistent congestion.

Moving a container from the Apapa port to a warehouse in Ikeja, which previously cost around N450,000, now ranges between N650,000 and N700,000, he said, noting that “all these things add up.”

Yet, market prices have moved marginally as big manufacturers tread carefully, selling what they preserved for the rainy days and absorbing some of the increased costs.

“We’ve maintained price levels,” George Onafowokan, chief executive officer of Coleman Wires and Cables, told BusinessDay. “In fact, we’ve even reduced them slightly in the last few weeks. 10 to 15 percent of all infrastructure spending is cable. So, you cannot just change prices. As much as we are like FMCG, we’re not food. So, we need to actually be careful on that aspect.”

Ajayi said that manufacturers who raise prices too quickly risk offending a price-sensitive market. “There is very high sensitivity to price escalation now because of diminished disposable income. This is not the time to just take a gamble that they will buy. They won’t.”

“If you push prices too high, all your customers will first run away. So, anything you do has to be marginal,” Onafowokan affirmed.

The current cushion is uneven. Exchange rate stability has encouraged raw material stockpiling, but only a minority of manufacturers in Nigeria have the financial capacity to do so, leaving the majority more exposed to sudden cost increases.

“About 70 percent do not have that capacity to stockpile,” Ajayi disclosed. “For those who don’t, it’s a direct hit.” For such companies, he said, caution simply means holding off from placing new orders that would be unsellable.

Manufacturers already hold trillions of naira in unsold finished goods. As at H1 2025, over N1.04 trillion worth of unsold goods remained, according to MAN.

But the strategy might not hold for long. Watchers say that if the Middle East war drags on towards the end of March, prices could begin to rise more sharply as manufacturers and importers are forced to restock and price available stock at higher costs.

“The best thing is for it not to be prolonged. Because those who have stocked up now, it will get to a stage where their pricing will be based on the cost at which they will replace their stock,” Ajayi said.

He noted manufacturers typically operate on a two to three-month replenishment cycle, which has so far helped delay the full impact of rising costs. But the buffer is time-bound.

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“You cannot stop production, because there are so many fixed costs that, whether you produce or not, you are incurring, the MAN secretary said.

“If you have bought something at $10,000 and the cost price of the raw material is now $15,000, it will get to a stage where you know that there is no possible reduction in that $15,000 out there. You have to price your stock above $15,000 for you to be able to replace. You get to a point where you can no longer remain cautious without putting yourself out of business.”

Onofowokan, who runs Coleman cables, said he is continuously reviewing his stock level margins in covering production costs. His next review is in 15 days. “The next 15 to 30 days will be a real decider. We may have to really make some tough decisions if we’re still in this bad scenario,” he said.