How higher diesel price is slowing Nigeria’s manufacturing growth

Nigerian manufacturers are facing a dire situation as the price of diesel continues to skyrocket, leading to significant operational challenges that could potentially shut down businesses. Chegung Ajayikadeer, the Director General of the Manufacturers Association of Nigeria, expressed concerns about the severe impact of the diesel price hike on manufacturers, as well as its repercussions on consumers and small businesses across the country. The sharp increase in diesel prices has had a ripple effect on the entire manufacturing sector, forcing businesses to scale back production, reduce operating hours, and lay off employees. This has not only disrupted the supply chain but also made Nigerian products less competitive in the global market. At the start of the year, Nigerian manufacturers were optimistic about recovering from the economic setbacks of the past few years. However, the drastic surge in diesel prices, exceeding 200% in the first quarter alone, has dashed those hopes. With unreliable power supply leading to increased reliance on diesel generators, businesses have been grappling with exorbitant fuel costs, which have eroded profit margins and made it challenging to meet production demands. As a result, many small and medium-scale industries have been forced to operate at reduced capacity and implement cost-cutting measures, including reducing staff numbers. One of the significant consequences of the diesel price hike is the inflationary pressure it has created, driving up the cost of production and resulting in higher prices for consumers. This not only hurts the average Nigerian consumer but also hampers government revenue generation. The manufacturing industry, once a vital contributor to the Nigerian economy, is now at risk of decline, with both medium and large-scale industries experiencing a decline in production output and profitability. As the crisis deepens, manufacturers are left grappling with how to navigate the challenges posed by the rising diesel prices. While some businesses have transitioned to using gas as an alternative fuel source, the escalating cost of gas presents its own set of challenges, particularly for small and medium-scale enterprises. The need for sustainable solutions has become increasingly urgent, with stakeholders calling for government intervention to alleviate the burden on manufacturers. Ajayikadeer emphasized the importance of addressing the various factors contributing to the high cost of manufacturing in Nigeria. He urged the government to prioritize allocating foreign exchange to manufacturers to facilitate the importation of raw materials and equipment at a lower cost. By addressing these systemic issues, the government can help ease the financial burden on manufacturers and bolster the competitiveness of Nigerian products in the global marketplace. In conclusion, the rising diesel prices in Nigeria have created a looming crisis for the manufacturing sector, with businesses struggling to stay afloat amidst escalating operational costs. The government's intervention through targeted policies and support measures is crucial to safeguarding the industry's future and ensuring its sustainability in the face of economic challenges.