A professor at Obafemi Awolowo University, Ile-Ife, Tunji Ogunyemi, has warned that a petrol subsidy return could sharply reduce money available through Nigeria’s Federation Account and leave about 15 northern states struggling to meet their financial obligations within three months.
Ogunyemi made the assessment during an appearance on the Open Forum 360 podcast hosted by Dare Adekanmbi on Friday, September 4, while discussing proposals for renewed government intervention in petrol pricing ahead of the 2027 general election.
The economic historian argued that many state governments remain heavily dependent on monthly allocations from the Federation Account to fund salaries, pensions and other public expenditure.
He said reducing the amount available for distribution could therefore place states with limited internally generated revenue under significant financial pressure.
According to Ogunyemi, only a small number of states have sufficiently strong independent revenues to operate with substantially less support from federal allocations.
He specifically warned that a sharp fall in Federation Account receipts could make some northern states unable to meet routine obligations within a few months.
“They will collapse within three months,” Ogunyemi said, referring to the states he believes would be most exposed to a reduction in federal allocations.
The professor also said lower government revenue could revive difficulties with salary and pension payments, while putting additional pressure on federal recurrent expenditure, capital projects and debt servicing.
His comments came amid debate over the petroleum policy proposed by former Vice-President and African Democratic Congress presidential candidate Atiku Abubakar.
Atiku has advocated renewed government intervention to reduce the burden of high energy costs. His camp has, however, clarified that the proposal would not recreate the previous system in which the government subsidised imported petrol.
Atiku’s representatives have said the proposed intervention would instead be targeted at domestic refining and production, capped in size and subject to transparency and audit requirements.
The distinction is significant because Ogunyemi’s warning was framed around the fiscal consequences of restoring a subsidy system that substantially reduces revenue accruing to the Federation Account.
Subsidy removal increased resources to states
President Bola Tinubu announced the end of Nigeria’s longstanding petrol subsidy during his inauguration on May 29, 2023.
The decision led to a sharp rise in pump prices and transport costs but also reduced a major expenditure burden on government finances.
Figures published by the Federal Ministry of Finance in August 2026 estimated that subsidy removal mobilised about N15.8 trillion in additional resources for the Federation between June 2023 and December 2025.
Of that amount, the Federal Government’s estimated share was about N5.43 trillion, while states received approximately N6.52 trillion and local governments about N3.88 trillion.
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele said the money did not exist as a separate account labelled “subsidy savings”. Instead, the fiscal benefit was reflected in higher resources available for distribution across the three tiers of government.
The ministry also said states received about N9.17 trillion more in Federation Account allocations between June 2023 and December 2025 than they would have received if the pre-subsidy-removal monthly revenue pattern had continued.
Ogunyemi’s warning therefore centres on the possibility that a petrol subsidy return, depending on how it is designed and funded, could reverse some of those fiscal gains and increase pressure on states that depend heavily on federal allocations.
The eventual financial impact would, however, depend on the structure, cost and funding mechanism of any future subsidy or targeted petroleum intervention.
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