FIFA vice president Jack Warner, concluding an inspection visit to the west African country, said just two of nine prospective venues were close to being ready for the tournament, scheduled to take place between October 24 and November 15.
But Warner said he would recommend a one-month grace period for venues to show signs of vast improvement.
"When the grace period expires, FIFA will return to visit the venues and if each and every one of them does not reach the 100 percent readiness level that we expect, then FIFA will withdraw the tournament hosting rights from Nigeria and go to another country," Warner told a news conference in Lagos.
"Frankly, from an objective point of view, Nigeria is not ready to host the tournament."
The stadiums in Abuja and Lagos are the only ones FIFA consider close to being ready for the tournament.
Two other proposed venues have been struck off the list while the FIFA delegation did not visit the stadium in Warri because of security concerns.
The warning is a setback to FIFA president Sepp Blatter who sought a public relations triumph by decreeing both world junior championships in 2009 be held in Africa.
Blatter, seeking to extend the legacy of the 2010 World Cup in South Africa further across the African continent, found his proposals met with little enthusiasm and FIFA received few formal bids for the under-20 and under-17 event.
Eventually Egypt and Nigeria, who have both previously held world junior championships, were persuaded to host again because of a lack of other suitable candidates.
