How Austerity Measures Could Affect the Price of Garri

Innovictor

New Member
Garri.jpg

On January 16, I started a thread on austerity measures being undertaken by the Federal Government in response to the global drop in crude oil prices. The post titled, "More Austerity Measures Underway, and Now I'm Scared" explored the recent austerity measures being taken the FG to cut costs and reduces expenses.

The austerity measures include the stoppage of the purchase of new furniture, and reduction in international travels and trainings by government officials by 50%. Other elements of the austerity measures are the commencement of 10% tan on private jets, 1% property tax on mansions whose value exceeds 300 million Naira and the introduction of a 3% surcharge on Champagnes.

States Are Now Going Lean

Latest reports show that we have not seen the last of the austerity measures even as the government is at the risk of running the fiscal 2015 budget at a deficit. According to piece on Punch, the Federal Ministry of Finance, the commissioners of finance and accountants-general of the 36 states have started working on how to reduce the ever-increase cost of governance in response to the sharp drop in government revenue from crude oil sales.

The Federal Ministry of Finance has organized a three-day national treasury workshop, with the theme: ‘Optimum funds management in the midst of cash flow challenges’, which is attended by commissioners of finance, accountants-generals and stakeholders in the finance and accounting government parastatals at the federal and state levels.

How Will You Be Affected?

If you are not involved in international economics, you might find it hard to understand how a drop in the global oil prices and the resultant austerity measures being introduced by the government might affect the price of Garri in the market. However, while the effects of the austerity measures might be not yet be visible to the average Nigerian on the street, the people who are most likely to feel the pinch of austerity measures are the masses.

Take for one, a reduction in the number of construction projects that the federal and state governments will award to construction companies this year. When construction companies record lower backlog of projects, they'll need to cut costs in order to keep their income above their expenses.

In cutting costs, construction companies will not reduce the structural integrity of projects; hence, they are not likely to reduce costs from construction materials used. However, they can reduce costs by reducing the number of people working on projects or by reducing how much they pay the people working on projects.

Now, most construction companies would have a hard time letting go of their engineers, architects and other professionals because they might need to shell out a huge amount of money in severance benefits. However, they might find it easier to offer the temporary workers/laborers a choice between outright termination of employment and pay cuts.

Given the high rate of unemployment in the country, the average laborer will prefer half-pay to no-pay; hence, the construction company is able to reduce expenses in response to reduced government patronage by reducing the pay of workers on the lowest rung of the ladder. It needs no mention that a pay-cut for laborers will have an effect on the quantity of Garri that they are able to put on the table for their families.
 
Back
Top