This paper examined subsidy regime in Nigeria, how it has negatively affected the economy and reduced spending on other sector of the economy especially the education sector. Content analysis was adopted for the paper. Both secondary and primary data were used in the paper to support points raised. The data were sources from national and international dailies, published, unpublished papers and articles and reference materials. The paper discovered that funds spent on subsidy of petroleum in Nigeria can be re-invest in the other sectors of the economy especially education (university education) and it would have multiplier effects on the economy in both short run and long run. This paper concluded that the of investment of some part of subsidy funds on the tertiary education in Nigeria would lead to adequate funding, infrastructural facilities development, adequate staff, quality research output, effective staff development, improvement international ranking, stable academic calendar and reduction in brain-drain problem. The paper recommended that the federal government should stop subsidy payment and invest the funds in the development of education (tertiary education) and other critical sectors.