The Executive Governors of more states in the Federation, unabashedly admitted recently, that, all is not well with their finances; indeed it has become, sadly evident, that civil servants in some states are owed several months salary arrears. 
The devastating impact of such experience on personal dignity, and self confidence will be appreciated by anyone who has suffered such deprivation; ultimately an abiding sense of responsibility and integrity may become compromised with rationalisation for self preservation, while the “opportunities” for unethical or corrupt enrichment may become identified as divine providence. Social Scientists may also argue that once a public servant crosses this Rubicon, other decisions involving public assets will be processed through the same prism of self interest rather than public service.

Consequently, even when such period of adversity is over, the once dedicated and honest civil servant will still remain hooked on a predatory diet of fellow countrymen!
Indeed, the spirit of genuine and undiluted dedication to public good, was probably extinguished when distinguished and dedicated civil servants, were notified of their summary dismissal from service, on radio and TV in January 1976, without fair hearing, by the presiding Military Junta. 

Thereafter, the civil service became an unsafe haven for a career, as one’s future could clearly be jeopardized without the protection of extant procedural rules that seemingly guaranteed job security, if one performed their duties diligently. Expectedly therefore, the erstwhile uncommon incidents of corrupt enrichment in public service soon gave way to what has become a concerted looting cult, in the guise of taking personal responsibility to safeguard one’s future, rather than enduring the uncertain prospect of honorable retirement with pension.

Furthermore, civil servants also recognized that the unrestrained inflationary trend instigated by serial Naira devaluations after 1985, also reduced the once life sustaining pension payments to monkey nuts! In this event, public servants needed no persuasion to ensure they put themselves first before the people they served.

Thus, it is possible that the spirit of "I" before state or country in public service may have become recharged throughout several states in the country by the current inability of several states to pay staff salaries. Certainly, under such circumstances, if the opportunity presents itself to collude and clandestinely dispose of expensive government equipment and machinery for self enrichment, there would be many converts who would readily streamline the process. Regrettably, such anti-social coup de tat, will be rationalised as self preservation and or a divine opportunity presented in answer to ardent prayers. 

Last week, a multifaceted Governors’ Forum, reportedly approached President Buhari, with a beggars’ bowl for funds to enable them meet their salary obligations. It is unclear how much each State requires, but what is certain, however, is that the federal government currently has no substantial reserves to dip into; besides, the completion of several critical federal projects is also challenged by paucity of funds.

Nevertheless, although the 2015 budget already projects about N1tn deficit, it is more probable that over N2tn may have to be borrowed with oppressive interest rates between 12-17 percent to fund the modest N4.5tn  budget and subsidize the pump price of fuel.

So, where will Buhari get the additional funds to bail out the States and also remediate those critical infrastructural deficits that urgently cry out for attention on the federal level, particularly in the areas of Education, Health, Transportation and Power. Inexplicably, rather than deploy the modest proceeds from the Excess Crude savings directly to critical infrastructure, these funds were stashed away as idle deposits and then gradually, simply whittled down, as recurrent consumption expenditure.

Indeed, despite the prevailing high interest rates, it may be difficult for those States with already high indebtedness to source funds from Commercial Banks, if these States do not provide a realistic repayment plan, particularly with their reduced monthly allocations due to the crash in oil prices. Alarmingly, internally generated revenue in some States remains well below 10 percent of total budget, so how will such States pay back additional loans, especially when gestation for new initiatives for internal revenue generation take considerable time to harvest?

However, as usual, CBN may be called to the rescue with bailout funds, similar to funds which were created to support banks during the financial crisis in 2008-9; that intervention process, despite its inflationary collateral, incidentally required over N5tn of fresh Naira supply to buy out those toxic debts that allegedly threatened the financial market and the entire economy. However, with unemployment still largely untamed, it remains debatable whether or not the bailout succeeded in redeeming the economy.

Nevertheless, some Nigerians may claim that what is good for the goose is also good for the gander; instructively however, most States may have very modest quality assets to pawn for the tens of billions of Naira that they may require as 'temporary' bailout to keep afloat. In any event, such bailouts will not attract zero interest rate. Eventually, the applicable cost of funds may mirror the pattern of other CBN interventions which carry about 9 percent rate of interest. Curiously, in consonance with the existing terms for similar interventions, the disbursing bank may earn the lion share of 7 percent while the CBN's return on its clearly inflationary investment will make up the balance 2 percent.

Nevertheless, it is pertinent to also ask how the CBN sources its seemingly inexhaustible supply of funds, especially when most of the funds provided to AMCON still remain outstanding. Well, the truth is that the CBN has the sole mandate to print money, and so far, there is no strict limit to how much cash it can release into the system at anytime.

What is however clear is that,  such increase in money supply will fuel inflation with adverse social and economic consequences, especially when CBN is already eternally preoccupied with the economic dislocations caused by the irreconcilable challenge of surplus Naira in the system.

Clearly, any additional cash intervention will threaten the capacity of CBN to keep inflation below 10 percent or to infact bring cost of funds below 7 percent, to support the growth of the real sector, and encourage job creation.

Furthermore, the resultant bloated Naira supply from such intervention will also ultimately weaken the Naira exchange rate against the dollar with negative consequences for production cost, fuel prices, subsidy and the competitiveness of Made-in-Nigeria products. Predictably, industrial productive capacity will contract and more Nigerians will sadly lose their jobs despite the bailout exercise. 
                                                                                                                            Ironically, however, some critics may note that it would equally be irresponsible and a contradiction of his party's campaign mantra of CHANGE if Buhari/CBN consider any bailout possibility whatsoever, before the States show convincing seriousness and commitment to significantly cut down on their clearly wasteful and prodigal habits. It is similarly worrisome that the alleged huge salaries and allowances of State Legislators appear to have been promptly settled despite the revenue shortfalls that made the payment of salaries of civil servants impossible for several months.

Instructively, even if funds are provided to the states to meet outstanding salary arrears, it is not yet clear how these states would meet their salary commitments in the foreseeable future, particularly if crude oil prices remain or fall well below $60/barrel.