What Is Subsidy and How Does It Apply?

Subsidy means ‘the loss of revenue that should otherwise have accrued to the Federation Account if the crude oil allocated for domestic refining and fuel consumption were to be sold at International prices. With deregulation, the federal government commenced the sale of crude oil to NNPC at the international price as against the former practice of concessionary prices. Through deregulation, the government will now capture its entire take from the sale of crude oil to be channeled into productive development projects. However, recent spikes in crude and products prices have necessitated government’s intervention so as to protect the citizens from the immediate impact of international market prices. Over time, it is hoped that the market will calm down and the modulator mechanism being introduced will enthrone greater participation and a more vibrant downstream sector.