A professor at Obafemi Awolowo University, Tunji Ogunyemi, has warned that reinstating petrol subsidy could plunge more than 15 northern states into severe financial crisis within three months.
Ogunyemi gave the warning while speaking on the Open Forum 360 podcast hosted by Dare Adekanmbi, in response to a proposal by African Democratic Congress presidential candidate, Atiku Abubakar, to restore petrol subsidy if elected president.
According to the university don, bringing back the subsidy regime would have far-reaching consequences for the nation’s finances, particularly by reducing the revenue available for sharing through the Federation Account.
“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.
“It will lead to four disabilities. The first is that there will be reduced accrual to the Federation Account.
Ogunyemi explained that the financial health of several states was closely tied to their monthly allocations from the Federation Account, with only a handful of states capable of operating without substantial federal support.
“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.”
He identified Lagos, Delta and Rivers among the states that could cope without heavy dependence on federal allocations, while citing Taraba as an example of a state that would face serious difficulties without federal support.
“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,” he said.
The don further warned that reduced revenue would make it difficult for affected states to meet their obligations to public servants and pensioners.
“The second is that states will return to a regime of incapacity to pay salaries, let alone pensions,” he said.
Ogunyemi said the consequences of reduced revenue would not be limited to the states, warning that the Federal Government could also struggle to finance its obligations.
He noted that a substantial portion of federal expenditure is devoted to recurrent commitments, leaving limited room for capital projects when revenue declines.
“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,” he said.
He also warned of possible consequences for Nigeria’s ability to service its debts.
“The fourth and the final one is that Nigeria will not be able to meet its debt obligations.”
According to the professor, any failure by the country to honour its debt commitments could damage Nigeria’s financial reputation and creditworthiness.
Ogunyemi also questioned the motivation behind Atiku’s promise to restore the subsidy, suggesting that the proposal could be politically driven.
He argued that, given Atiku’s experience as a former vice-president, he ought to provide greater clarity on the likely economic consequences of such a policy.
“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.
“You don’t want to get political support through votes or more votes by wanting to cut the jugular of your country.”
(The CABLE)
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