THE MULTIPLIER EFFECTS OF GOV. AYADE’S MASSIVE APPOINTMENT

Office of the SSA on Mobilization and enlightenment

January 9, 2019

The term "multiplier" is a macro-economic concept that is used to describe a factor of proportionality that measures how much an endogenous variable, such as aggregate consumption or income, responds to exogenous variable, such as investment and government expenditure. The “multiplier effect” is particularly used with reference to increase in final income arising from any new injection of spending.
The size of the multiplier depends, to a great extent, on household’s marginal propensity to consume (MPC) and marginal decision to save, otherwise known as the marginal propensity to save (MPC).

Now, one important reason why Nigeria still remains an economically backward nation is that stolen moneys from government coffers are either kept in foreign accounts or kept idle for fear of EFCC or ICPC. Since such funds are not invested or injected into the income streams in the economy, they do not have any productive or ripple effects on the economy. No economy is sensitive enough to detect proceeds of corruption or otherwise, because the metaphysical invisible hands of the price mechanism is at work, in an economy that is tilted to free enterprise system such as Nigeria. I hope I am not being misconstrued as supporting corruption.

Governor Ayade’s three years plus in office has seen young people of different classes in government more than any Governor in Nigeria. Besides, he is the only Governor that pays workers in advance - sometimes, he pays salaries on the first day of a month.

By so doing, the Governor is creating more wealth in Cross River State, through the powerful economic catalyst of multiplier effect.

How does it work?
As government pays the massive number of appointees or gives out moneys in form of empowerment, new money is injected into the Cross River State economy – those who receive it usually spend part of it, and save part of it. If, for example, N100b is paid out at the end of the month; 90 percent of the money received is spent and ten per cent is saved. Then there is N90b new money in the economy, and the receivers spend the entire 90 per cent of that and save ten per cent.

That continues until the amount injected into the economy may be as many times the original investment. The impact of the new volume of money if felt in the entire economy, leaves the populace better off – there will be new buildings, improved standard of living, reduction in crime rate and beggarly political life, more investment and so on.

However, what will happen, when the government of the day is rather conservative, hoarding money and giving little employment? It implies that the reverse will be the case. This is the rationale that explains why Jonathan government that people think was corrupt tended to be more buoyant than the present administration at the national level. In the former, there was free flow of moneys, whereas, in the present one austerity measures were adopted through the use of policy mix, including the TSA.

In summary, since the economy is insensitive to the morality or illicitness of spending, let us allow policies, such as avant-garde approach, rather than conservative measures that will leave millions of people in abject penury.
Those who, therefore, wish to learn the economics of buoyancy should borrow a script from His Excellency, Governor Ben Ayade.