The need to build strong, vibrant and formidable universities in Nigeria is crucial, and this cannot be over emphasized. Most transformations experienced in all spheres of life today across the globe came through teaching and research activities of Universities. University Education has thus become an important tool for development of the nations, and therefore must be organized in such a proactive way that would guaranty efficiency and high productivity. This paper makes a review of the usefulness of the principle of institutional autonomy and academic freedom in Nigerian Universities. This lingering issue has caused colossal disaffection in the running of universities across the nation. Over interference of government and other external forces has left a poor relationship between the major internal stakeholders of universities like the Academic Staff Union of Universities (ASSU) and other unions in the institutions. The study was anchored on self-determination theory, this calls for an attitudinal change of government and agents in the universities towards embracing the principle of institutional autonomy because of the enormous benefits in it. The work highlighted some of such benefits like, the encouragement of academic excellence, contribution to the high-income economy, and building a focused education that would secure a better future for the younger generations.