A Professor at Obafemi Awolowo University, Ile-Ife, Professor Tunji Ogunyemi, has warned that a return to the petroleum subsidy regime could have devastating consequences for Nigeria’s public finances, including the possible collapse of more than 15 states in the northern region.

Ogunyemi, an economic historian, lawyer and public affairs analyst, argued that restoring the subsidy would significantly reduce funds available to the Federation Account and leave many states unable to meet their basic financial obligations.

The university don made the remarks during an edition of the Open Forum 360 podcast hosted by Dare Adekanmbi.

He said the consequences of reversing the current subsidy policy would be severe.

“I think it is calamitous, to say the least, if we reverse the subsidy regime in Nigeria in favour of returning the subsidies.

“It will lead to four disabilities. The first is that there will be reduced accrual to the Federation Account.”

According to Ogunyemi, the Federation Account remains the financial lifeline of the overwhelming majority of states in Nigeria, with only a handful capable of surviving without monthly federal allocations.

“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.

“So if you now say reduce the accrual from account, I tell you more than about 15 states in the north will collapse. They will collapse within three months.”

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He further warned that a reduction in funds available to governments could once again leave many states struggling to pay workers and pensioners.

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

“The fourth and the final one is that Nigeria will not be able to meet its debt obligations.”

Professor Ogunyemi also took a swipe at the position of the African Democratic Congress, ADC, presidential candidate, Atiku Abubakar, on the issue of petroleum subsidy, describing the proposal as politically motivated.

“I think it is playing to the gallery, with due respect to him. He should be a little less opaque about his policy.

“You don’t want to get political support through votes or more votes by wanting to cut the jugular of your country,” Ogunyemi said.

The professor maintained that only a few states possess the economic strength and internally generated revenue capacity to cope without federal allocations.

He identified Lagos, Delta and Rivers among the states that could survive without depending heavily on monthly allocations from the Federation Account, while citing Taraba as an example of a state that would find it difficult to survive without such support.

Ogunyemi’s intervention comes amid renewed political debate over the removal of petroleum subsidy and calls in some quarters for its restoration, with the OAU scholar warning that any move to return to the old regime could place enormous pressure on government finances and threaten the survival of several states.

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