Newsfront Online Newsfront Online
Nigerian manufacturers are facing renewed pressure from soaring energy costs and worsening electricity supply, further raising the cost of production and threatening industrial output due to the escalating geopolitical tensions in the Middle East involving the United States, Israel and Iran.
The conflict has pushed global crude oil prices close to $100 per barrel, triggering a surge in domestic fuel prices. LEADERSHIP reports that the retail price of Premium Motor Spirit (PMS), commonly known as petrol, has risen to about N1,180 per litre, while Automotive Gas Oil (diesel) now sells for approximately N1,350 per litre across major cities. The development is significantly increasing the cost of running fuel-powered generators, the primary source of electricity for many Nigerian factories due to the country’s unreliable power supply.
Manufacturers already grappling with the depreciation of the naira, rising inflation, and high borrowing costs are now facing additional operational strain as energy expenses continue to climb. Electricity supply across the country has also deteriorated since early March 2026, compounding the burden on businesses that rely on stable power to sustain production.
Speaking to LEADERSHIP, the General Secretary of the National Union of Electricity Employees (NUEE), Comrade Dominic Igwebuike, criticised electricity distribution companies over the persistent power challenges in the country, calling for a reversal of the 2012 privatisation of the power sector.
According to him, the distribution companies have failed to make meaningful investments in the sector since assuming control more than a decade ago. “The private investors are not doing anything to improve the sector. Since 2012, which is over 10 years now, they have not added any significant megawatts to the grid. We are still operating between 4,000 and 5,000 megawatts, the same level as before privatisation,” he said.
Igwebuike argued that instead of improving service delivery, electricity distribution companies have prioritised profit, introducing higher tariffs while many Nigerians continue to experience poor or irregular power supply.
“They have increased tariffs and created different electricity bands, where a privileged few enjoy near 24-hour electricity while the majority struggle with little or no power supply,” he said.
He further described the entire electricity value chain as weak and poorly coordinated, stressing that Nigeria lacks a clear development plan for the power sector. “There was no development plan for the electricity sector. The government and distribution companies have received billions of naira in grants and loans, including funds from the World Bank, but Nigerians are yet to see meaningful results,” he added.
Igwebuike called for urgent mass metering of electricity consumers to eliminate estimated billing, while also urging government to invest in building additional power plants and expanding distribution infrastructure.
“It takes between four and five years to build a power plant. The government must take deliberate steps to improve electricity generation and strengthen the distribution network so that power can reach consumers efficiently,” he said. Beyond the power sector concerns, economists warn that the rising cost of energy is putting severe pressure on Nigeria’s manufacturing sector.
Energy-intensive industries such as cement, food processing, plastics, steel and chemicals rely heavily on diesel-powered generators to maintain production. In many cases, energy costs already account for 30 to 40 per cent of total operating expenses.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, noted that Nigeria’s deregulated downstream petroleum market means domestic fuel prices are highly sensitive to global oil price movements.
“Nigeria operates a deregulated downstream petroleum regime. Higher international crude oil prices feed directly into higher petrol, diesel and aviation fuel costs,” Yusuf explained. He noted that rising fuel costs inevitably translate into higher logistics and transportation expenses across the economy.
“The knock-on effect of rising diesel and petrol prices includes higher transportation and logistics costs. This affects the movement of raw materials to factories and the distribution of finished goods to markets. Food distribution costs are also increasing, which further fuels inflation,” he said.
According to him, manufacturers are left with limited options. “As companies absorb these rising costs, profit margins shrink significantly. In many cases, firms are forced to increase product prices or scale down production in order to remain viable,” he added.
Yusuf warned that sectors such as manufacturing, aviation, logistics and consumer goods are particularly vulnerable to margin compression under the current economic conditions. Similarly, the Managing Director and Chief Executive Officer of Coleman Technical Industries Limited, Mr. George Onafowakan, said unreliable electricity supply has long been an operational challenge for Nigerian manufacturers.
“No factory in Nigeria is built without factoring in alternative power sources, whether diesel or gas generators. Every manufacturer essentially has to act as its own local government when it comes to providing electricity for production,” he said.
Inside many of Nigeria’s industrial clusters, the reality of this challenge is evident.
Factories operate under the constant roar of diesel generators that serve as the backbone of production, compensating for erratic electricity from the national grid. Engineers and technicians routinely monitor generator performance and fuel consumption to avoid disruptions that could halt production.
Onafowakan explained that sudden power interruptions can stall entire production lines, disrupting schedules and putting pressure on manufacturers to meet delivery deadlines. “When the lights go off, everything stops. We switch to generators, but the cost is rising rapidly. There is always the stress of whether production targets will be met,” he said.
He warned that the full impact of the recent fuel price increases may become more evident in the coming months if global oil prices remain elevated. “Manufacturers have planned ahead and absorbed some of the initial increases, but if this trend continues, the real pressure will begin to show within the next three to four months,” he said.
“By the second quarter, businesses may be forced to make difficult decisions regarding production planning and product pricing.” Smaller manufacturers, he noted, are particularly vulnerable because they lack the financial buffers available to larger firms.
Many small-scale operators are already struggling to keep generators running, maintain payroll obligations and meet supply commitments. Production delays caused by power disruptions can also ripple through supply chains, affecting businesses that rely on timely deliveries and ultimately leading to higher prices for consumers.
The National President of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, also warned that the combined effect of rising diesel prices and unreliable electricity supply is severely affecting small and medium-scale enterprises.
He said economic reforms introduced over the past two to three years have already squeezed business margins, forcing many firms to pass increased costs to consumers at a time when purchasing power remains weak. According to Egbesola, locally produced goods are increasingly struggling to compete with cheaper imported alternatives, putting the survival of many small businesses at risk.
“Many small businesses are shutting down or barely managing to stay afloat,” he said.
He stressed that improving Nigeria’s electricity supply should be a top government priority, as it would significantly reduce reliance on costly diesel and petrol generators. Currently, he noted, about 40 per cent of small businesses’ income is spent on energy generation, while another 15 per cent goes into logistics costs.
Egbesola also urged government to accelerate the adoption of compressed natural gas (CNG) as an alternative fuel for transportation and industrial operations. “Addressing these challenges will help create a more vibrant and sustainable business environment in Nigeria,” he said.
