Rolling back fuel subsidies could cripple 15 Northern states, OAU professor warns

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

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

This statement was made by the university on the Open Forum 360 podcast edition hosted by Dare Adekanmbi.

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

“I think it would be a disaster, if we reversed the subsidy system in Nigeria and replaced it with subsidy rollbacks.

“This will cause four defects. The first is that there will be a reduction in accruals to the Federation Account.”

According to Ogunyemi, the Federation Account remains the financial backbone of most states in Nigeria, and only a handful of states can survive without monthly federal allocations.

“The Federation Account belongs to 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 accruals from the accounts, I tell you that more than 15 states in the north will collapse. They will collapse within three months.”

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He further warned that reductions in funds available to the government could again leave many states struggling to pay the salaries of workers and retirees.

“The second is that countries will return to a regime of not being able to pay salaries, let alone pensions. That is consumption spending.

“If you reduce revenues in this case, you will see a situation where the government will not be able to support its minimum expenditure, let alone capital expenditure.

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

Professor Ogunyemi also criticized the position of African Democratic Congress, ADC, presidential candidate, Atiku Abubakar, on the issue of petroleum subsidies, describing the proposal as politically motivated.

“I think this is just playing around, with respect to him. He shouldn’t be so opaque about his policies.

“You don’t want to gain political support through gaining votes or more votes by wanting to cut your country’s borders,” Ogunyemi said.

The professor stated that only a few states have the economic strength and internal revenue capacity to overcome the shortfall in federal allocations.

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

Ogunyemi’s intervention comes amid renewed political debate over the removal of petroleum subsidies and calls in some quarters for restoration. The OAU expert warned that any move back to the old regime could put enormous pressure on government finances and threaten the survival of some states.