The needs assessment report of Nigerian public universities (2012) exposed a disturbing level of decay in public universities in Nigeria. The report, among other things advocated better financial management as a panacea for revitalising the university system. This paper compared the direct funding allocation mechanism (which is the major way of funding public universities in Nigeria) with indirect funding mechanisms. Results from the comparison showed that indirect funding mechanisms like education vouchers applied to both public and private universities would increase the capacity of private universities to compete with the overly dominant public universities. It was therefore concluded that a mixture of a market driven mechanism like the voucher system mixed with the current direct system of funding will be better suited for driving innovation and entrenching financial prudence in the Nigerian universities.