Manufacturers face margin squeeze as China freight rates jump

Manufacturers in Nigeria are staring at fresh cost shocks after some of the world’s largest shipping lines imposed new surcharges on cargo from China, the country’s biggest source of imports, threatening to further erode margins at a time when weak consumer demand leaves little room to raise prices.

Within weeks of each other, at least three global carriers announced new charges on shipments from China and other Asian markets to Nigeria and West Africa.

Maersk is levying $1,000 per 20ft container and $2,000 per 40ft box on the China-Nigeria corridor from June 1. CMA CGM raised its surcharge to $750 per 20ft equivalent unit from June 8, having set the charge at $600 just a week earlier. Hapag-Lloyd applied a $200-per-TEU surcharge from mid-May, while Ocean Network Express (ONE) has added an emergency fuel surcharge on imports to the Apapa Port from Shanghai on top of existing charges.

One document seen by BusinessDay showed that a 40ft ONE container shipment from Shekou Port in China to the Lekki Port in Lagos now costs up to $6,820. Five months ago, it would have shipped for $3,000 on a bad day.

Meanwhile, Nigeria remains heavily dependent on Chinese goods despite years of efforts to deepen local manufacturing.

Data from the National Bureau of Statistics (NBS) show the country imported N5 trillion worth of goods from China in the first quarter of 2026, accounting for 37.4 percent of total imports.

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Industrial machinery, electronics, manufacturing inputs, chemicals, solar equipment and other goods arrive in the containers that feed directly into domestic production.

The nation’s factories are still very much dependent on imported inputs, with over 70 percent of them used in the country’s manufacturing sector sourced from abroad, says the Raw Materials Research and Development Council (RMRDC).

The situation has put Nigeria’s manufacturers in a precarious dilemma. The majority have burned through their raw and finished materials inventories that helped them keep prices moderate for consumers. New shipments coming at elevated market rates mean they must decide whether to raise prices to leapfrog losses or absorb and retain their price-averse buyers.

The self-sustaining factories, the majority of which do not enjoy the elasticity of conglomerates, have bitten the bullet, resorting to minimal increases in their product pricing to shed some of the weight on consumers while letting off some profit.

“We bear the brunt directly, because you wouldn’t want to put that whole burden on your clients despite the shock. You want to maintain them,” said Esther Williams, chief executive finance director at Williams Dabo Group, which imports machinery and finished goods including batteries and solar panels from China.

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When asked how much of the added costs the company bears, she said they split it 70:30. “The importers bear 70 percent. In effect, it affects your profit,” Williams said.

That dynamic is playing out across a manufacturing sector already under strain. “The economy isn’t too good to support increases in the price of finished products. So manufacturers have to take on these additional charges, taxes and levies, and therefore cannot increase prices,” said Frank Onyebu, immediate past chairman of the Manufacturers Association of Nigeria, Apapa.

A Boston Consulting Group Africa Consumer Sentiment Survey 2025 found that 83 percent of Nigerian households cut back on discretionary purchases as double-digit inflation, slow income growth, and an uncompetitive currency erodes purchasing power.

“You have things you want to sell, you have produced a lot, and currently because of the way the economy is, people are not buying,” Onyebu said. “And if people are not buying something they are selling for 10 naira, can you think about increasing the same products for 12 naira?” he quizzed.

Competitive pressures also limit how aggressively companies can adjust prices, particularly when bigger rivals are still selling out of inventory imported before the latest increases took effect. But business must go on.

“There’s only so much we can absorb until we’ll have to pass it on,” said George Onafowokan, chief executive of Coleman Wires and Cables in an interview. “The buffer has finished. We all have to now come back to reality.”

Some manufacturers like Onafowokan have partially insulated themselves through backward integration, sourcing inputs locally that would be otherwise imported.

“The bigger the industry started getting, the more the supply chain elements started becoming local. So, certain elements of our production have started becoming localised and our own imports over time are gradually coming down,” he said.

But the option is not available to most. Smaller manufacturers lack the scale and financial flexibility to withstand repeated increases in operating costs. Onyebu claimed that up to 50 percent of manufacturers in Nigeria “especially the SMEs,” struggle with higher costs, he said.

NBS reports show that SMEs in Nigeria account for up to 50 percent of industrial jobs and nearly 90 percent of the manufacturing sector, in terms of the number of enterprises.

A cocktail of rising shipping costs from dependent economies and weak demand has created what he called a “perfect storm” for an already fragile industrial base. “We need to find a way of not allowing things to get worse than they are right now,” he said.

For now, manufacturers are doing what they have always done in the lean years. Holding the line, cutting where they can, and waiting.