15 northern states may collapse if fuel subsidy returns — Don warns

A university professor, Prof. Tunji Ogunyemi, has warned that the return of petrol subsidy could push more than 15 states in northern Nigeria into serious financial difficulties within a few months.

Ogunyemi said the reintroduction of the subsidy could significantly reduce the funds available in the Federation Account, which remains a major source of revenue for many state governments.

Speaking on the possible consequences of reversing the current subsidy policy, the professor described such a move as dangerous for the country’s economy.

“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.

According to him, many states across the country depend heavily on monthly allocations from the Federation Account to meet their financial obligations, including the payment of workers’ salaries and pensions.

“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 explained that while a few states with strong internally generated revenue may be able to withstand a reduction in federal allocations, several others could face serious financial challenges if the funds available for sharing decline.

Ogunyemi warned that the situation could be particularly severe in the northern region, where many states rely heavily on allocations from 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 said.

The professor further warned that such a development could affect the ability of state governments to pay salaries and pensions, leaving workers and retirees facing fresh uncertainty.

“The second is that states will return to a regime of incapacity to pay salaries, let alone pensions,” he added.

He also expressed concern that a reduction in government revenue could affect the Federal Government’s capacity to fund critical projects and meet other financial commitments.

According to him, a substantial portion of government revenue is already spent on recurrent expenditure, meaning that any major reduction in available funds could further limit spending on infrastructure and other capital projects.

The warning comes amid renewed debate over calls for some form of intervention in petrol pricing and the wider impact of the removal of fuel subsidy on Nigerians.

The subsidy removal has remained a major economic and political issue since President Bola Tinubu announced the end of the regime in May 2023. While the policy has increased revenue available to different levels of government, it has also been linked to higher fuel prices, transportation costs and increased living expenses for millions of Nigerians.

The debate has also intensified as different political figures and economic experts continue to offer varying opinions on whether Nigeria should maintain the current policy or introduce targeted interventions to reduce the burden on citizens.

However, Ogunyemi maintained that any decision to return to the previous subsidy regime must take into consideration its possible impact on government finances and the survival of states that depend largely on federal allocations.