Rising logistics expenses and persistent energy cost inflation are forcing many small and medium-sized enterprises (MSMEs) in Nigeria out of the export market, according to a new industry report that highlights mounting structural pressures on Africa’s largest economy.
The report points to a widening competitiveness gap between Nigerian exporters and their counterparts in lower-cost production hubs. Freight charges, port inefficiencies, and unpredictable fuel and electricity costs have combined to erode already thin margins for firms operating in manufacturing, agro-processing, and light industrial goods.
For MSMEs, which account for the bulk of private-sector employment, the implications are particularly severe. Many firms are increasingly unable to meet international price benchmarks, especially in export corridors tied to Europe and intra-African trade under the African Continental Free Trade Area (AfCFTA). Instead, they are scaling back production, redirecting output to the domestic market, or shutting down export operations entirely.
Energy remains a central constraint. Despite incremental reforms in the power sector, most small manufacturers continue to rely heavily on diesel generators, exposing them to volatile global oil prices and foreign exchange pressures. Combined with rising transport costs linked to road conditions and port delays, the overall cost of getting goods to market has climbed sharply over the past two years.
The report also highlights inefficiencies in Nigeria’s logistics ecosystem, including congestion at major ports, limited rail freight alternatives, and fragmented distribution networks. These bottlenecks not only raise costs but also lengthen delivery times, undermining the reliability required for export contracts.
Economists warn that the trend could weaken the country’s non-oil export diversification agenda. With crude oil still dominating foreign exchange earnings, policymakers have long sought to expand manufactured and agricultural exports as a buffer against commodity shocks. However, without meaningful reductions in production and logistics costs, MSMEs may struggle to play that role effectively.
Industry stakeholders are calling for targeted interventions, including expanded investment in power infrastructure, tax relief on industrial energy inputs, and accelerated port modernization. Some analysts also argue for deeper reforms in customs administration to reduce clearance delays and informal charges.
Unless addressed, the cost pressures could deepen Nigeria’s trade imbalance and further constrain job creation in the formal manufacturing sector, which remains critical for long-term economic stability and industrial growth.
