Professor Tunji Ogunyemi of Obafemi Awolowo University, Ile-Ife, has warned that reversing Nigeria’s fuel subsidy removal could place severe pressure on state finances, with as many as 15 northern states potentially unable to sustain their operations within months.
Ogunyemi, an economic historian, lawyer and public affairs analyst, made the assessment while discussing Nigeria’s fiscal position and the political debate over fuel subsidy on the Open Forum 360 podcast hosted by Dare Adekanmbi.
The university don also criticised the African Democratic Congress presidential candidate, Atiku Abubakar, over his position on the subsidy question, describing the former vice-president’s approach as “playing to the gallery” and urging him to provide greater clarity about the financial consequences of the proposal.
According to Ogunyemi, bringing back the subsidy regime would reduce the amount of revenue available for distribution through the Federation Account, which he described as the financial lifeline for more than 30 states across Nigeria.
Ogunyemi warns of revenue shock
The professor argued that the consequences of restoring petrol subsidies would extend beyond the price Nigerians pay at filling stations.
His central concern is the effect that government spending on subsidy would have on revenue available to the Federation Account and, consequently, the resources transferred to states.
Ogunyemi said only about four Nigerian states have sufficient internally generated resources to operate without relying on allocations from the Federation Account.
He identified Lagos, Delta and Rivers among states that he said could cope without the monthly federal allocations, while citing Taraba as an example of a state whose finances are heavily dependent on federal transfers.
Against that background, he warned that a reduction in federal revenue available for distribution could have serious consequences for states that lack the capacity to generate enough income internally.
“So if you now say reduce the accrual from the federal account, I tell you more than about 15 states in the north will collapse. They will collapse within three months,” he said.
The three-month timeline is Ogunyemi’s projection of what could happen under a renewed subsidy regime and is not presented as an independently verified forecast.
Salaries and pensions could come under pressure
Ogunyemi further argued that reduced allocations could return many states to the type of fiscal difficulties that previously made it difficult for governments to meet recurrent obligations.
He specifically pointed to the ability of state governments to pay workers’ salaries and pension obligations.
According to him, salaries and pensions form part of government consumption expenditure, meaning that a significant reduction in available revenue could make it increasingly difficult for states to meet those commitments.
“The second is that states will return to a regime of incapacity to pay salaries, let alone pensions,” Ogunyemi said.
He argued that governments would first struggle to maintain basic recurrent expenditure before they could even begin to consider significant capital projects.
His position is that restoring subsidy would therefore have consequences far beyond the petroleum sector because the reduction in distributable revenue could affect the capacity of state governments to fund essential obligations.
Capital spending also at risk
The professor also warned that a reduction in government revenue would affect states’ ability to invest in infrastructure and other development projects.
He argued that once a state struggles to meet its minimum recurrent expenditure, the possibility of allocating significant resources to capital expenditure becomes even more difficult.
In his assessment, the fiscal pressure created by reduced Federation Account revenue could leave governments focused primarily on meeting immediate obligations rather than funding new infrastructure and development programmes.
This, he suggested, would weaken the ability of affected states to maintain a balance between recurrent spending and long-term investment.
Ogunyemi described the potential reversal of the subsidy policy as “calamitous”, arguing that the fiscal consequences should be considered alongside the political appeal of lower petrol prices.
Debt obligations could become another problem
Another consequence identified by Ogunyemi is the potential impact on Nigeria’s ability to meet its debt obligations.
He argued that a decline in government revenue would not only affect allocations to states but could also make it more difficult for Nigeria to service its debts.
“The fourth and the final one is that Nigeria will not be able to meet its debt obligations,” he said.
His warning forms part of a broader argument that fuel subsidy should not be viewed only through the immediate question of petrol prices.
While subsidy can reduce the price consumers pay at the pump, the professor’s position is that the government must also account for the fiscal resources that would be required to maintain such a system and the potential effect on revenues available to the different tiers of government.
Atiku’s position criticised
Ogunyemi also turned his attention to Atiku Abubakar’s position on the fuel subsidy debate.
He argued that the ADC presidential candidate needed to explain more clearly how his proposal would work and what its consequences would be for Nigeria’s finances.
The professor described the position as “playing to the gallery”, while stressing that his criticism was made with respect for the former vice-president.
“I think it is playing to the gallery, with due respect to him. He should be a little less opaque about his policy,” Ogunyemi said.
He argued that political leaders should be explicit about the financial implications of policies designed to attract public support.
For Ogunyemi, the attraction of lower petrol prices should not obscure the potential consequences for federal revenue, state allocations, public-sector salaries, pensions, capital spending and debt obligations.
‘You don’t want to get political support’
The OAU professor further warned against using subsidy proposals primarily as a means of securing political support.
He argued that political calculations should not override consideration of the wider fiscal consequences of a policy affecting one of Nigeria’s largest expenditure areas.
“You don’t want to get political support through votes or more votes by wanting to cut the jugular of your country,” he said.
The remark reflects Ogunyemi’s broader contention that subsidy policy should be evaluated according to its impact on the country’s overall finances rather than solely on whether it lowers the immediate cost of petrol.
His argument is that the Federation Account remains critical to the functioning of most states, making changes to federal revenue particularly consequential for governments that have limited internally generated revenue.
Northern states face particular exposure, professor says
Ogunyemi’s warning places particular emphasis on northern states, where he said more than 15 could face collapse within three months if the subsidy regime were restored and federal allocations consequently reduced.
Taraba was cited as an example of a state that, in his assessment, could not function independently of federal allocations.
By contrast, Lagos, Delta and Rivers were among the states he identified as having stronger capacity to operate without monthly Federation Account distributions.
The difference illustrates the uneven fiscal capacity among Nigeria’s 36 states. States with stronger internally generated revenue would, under Ogunyemi’s argument, have greater room to absorb a reduction in federal transfers, while states more dependent on allocations would face greater pressure.
His warning therefore centres on the vulnerability created by dependence on federal revenue rather than on petrol subsidy alone.
Subsidy debate remains a fiscal question
Ogunyemi’s intervention adds a strong economic argument to the political debate over whether Nigeria should maintain the current post-subsidy framework or consider some form of subsidy return.
His position is that reversing the policy could trigger a chain of fiscal consequences, beginning with reduced revenue accruing to the Federation Account and extending to state allocations, salary and pension payments, capital expenditure and debt servicing.
He consequently urged political advocates of a subsidy return to explain the complete financial implications of their proposals.
For Atiku, the professor’s criticism is that the policy position requires greater clarity, particularly because a decision that may provide immediate relief at the petrol pump could have consequences for government revenues and public finances.
Ultimately, Ogunyemi’s warning is based on his assessment that Nigeria’s fiscal system remains heavily dependent on Federation Account distributions and that many states lack sufficient internally generated revenue to replace those funds.
His forecast that more than 15 northern states could collapse within three months remains his stated projection, but it underscores the scale of the financial risks he believes would accompany a return to fuel subsidy.
The debate, as framed by the OAU professor, is therefore not simply about the price of petrol. It is also about how Nigeria would finance its federal and state governments if a substantial portion of public revenue were redirected towards subsidising petroleum consumption.
15 Northern States Could Collapse If Fuel Subsidy Returns, OAU Professor Warns
