Nigeria's political landscape appeared to have been marred by internal party conflicts that obviously undermine political cohesion and democratic participation. The lack of internal party democracy within political parties has resulted to poor application of democratic principles. Essentially, rule of law, participatory democracy that will open the democratic space have been relegated to the background. This paper argued that the tendency of the ruling political party or party financiers to destabilize opposition political parties narrows down the political space and deter people from actively participating in politics in Nigeria. It further noted the centrality of internal party democracy is to serve as a cornerstone for active engagement of the citizens and the furtherance of democratic consolidation. Relying on documentary method of data collection and sequential analytical technique, the paper adopted institutional theory as its theoretical guide. It concluded that poor institutionalization of political parties in Nigeria makes these political parties vulnerable to internal instability. We therefore recommended reforms and constitutional amendment to redesign party system in Nigeria so as to reduce the tendency of untoward influence to political parties while at the same time reposition political parties on the path of institutionalization.