A professor at Obafemi Awolowo University, Tunji Ogunyemi, has warned that restoring petrol subsidy could leave about 15 states in northern Nigeria unable to sustain their operations within three months.
Ogunyemi gave the warning during an interview on Open Forum 360 on Friday, a podcast hosted by Dare Adekanmbi, while reacting to a proposal by African Democratic Congress presidential candidate, Atiku Abubakar, to restore petrol subsidy if elected in 2027.
The professor argued that bringing back the subsidy would reduce the funds available for distribution through the Federation Account, on which most states rely to finance government operations.
“I think it is calamitous, to say the least, if we reverse the subsidy regime in Nigeria in favour of returning the subsidies,” he said.
Ogunyemi said the consequences would extend beyond the states, listing reduced Federation Account revenue as one of four major problems that would arise from a return to the subsidy regime.
“The Federation Account is the jugular of more than 30 states in the federation. Only about four states in Nigeria can survive without the Federation Account,” Ogunyemi stated.
He identified Lagos, Delta and Rivers as states that could cope without depending heavily on federal allocations, while citing Taraba as an example of a state whose finances are significantly dependent on the Federation Account.
“So if you now say reduce the accrual from the account, I tell you more than about 15 states in the north will collapse. They will collapse within three months,” he stated.
He added that a revenue squeeze would make it difficult for state governments to meet their obligations to workers and pensioners.
He said, “The second is that states will return to a regime of incapacity to pay salaries, let alone pensions.”
Ogunyemi also warned that the Federal Government would face difficulties funding its recurrent and capital expenditure if its revenue share declined.
He said between 60 and 70 per cent of the Federal Government’s expenditure goes to recurrent spending, describing it as “consumption expenditure”.
“That is consumption expenditure. You reduce the revenue in that respect, you will see a situation in which government will not be able to support its minimum expenditure, let alone go for capital expenditure,” he said.
The professor further warned that declining revenues could affect the country’s ability to service its debts.
According to Ogunyemi, failure to meet those obligations could damage Nigeria’s financial standing and creditworthiness.
He also questioned Atiku’s proposal, suggesting that the former Vice-President could be using the subsidy promise to gain political support.
He argued that Atiku, having served as vice-president, should be more explicit about the possible consequences of restoring the subsidy.
Atiku had initially pledged to restore the subsidy, arguing that Nigerians had not seen sufficient benefits from its removal and questioning how the funds saved from the policy had been used.
However, Atiku later clarified that his proposal was not a return to the former import-subsidy arrangement. He said he favoured a targeted and capped intervention that would support domestic refining and production, with transparency and auditing built into the scheme.
The subsidy was removed by President Bola Tinubu during his inauguration on May 29, 2023, when he declared that “fuel subsidy is gone.”
The policy immediately triggered a sharp increase in petrol prices and contributed to higher transportation and living costs.
The Federal Government has defended the decision as necessary to reduce fiscal pressure and free resources for other levels of government.
The Finance Ministry said the reforms generated an estimated N15.8tn in resources for the Federation between June 2023 and December 2025.
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