Fuel subsidy is the transfer of economic resources by the government to consumers or producers of a good or service. The resultant incentive is to boost production or consumption of a commodity over what it would otherwise have been. However, critiques of energy subsidies believe otherwise. They say subsidies distort markets and discourage investments. Some have argued that subsidies exist where the Government fails to implement programs to internalize uncontrolled costs in energy markets.
Others argue that Government regulation creates a subsidy when it fails to set fuel prices equal to the marginal cost of production.
According to the Natural Resource Institute, an independent, non-profit organization, Domestic Crude Allocation has become the engine of waste and revenue loss of the Nigeria National Petroleum Corporation . The Nigerian Government allocates about 445,000 barrel of crude per day to NNPC, which it in turn sell to derive revenue. The DCA money spent by NNPC delivers poor value for money.
The previously released Forensic Audit of NNPC by Price Waterhouse Coopers showed that fuel subsidy cost Nigeria almost $10 billion between January 2012 and July 2013. Over the years fuel subsidy has been 2 and 5 times the size of the federal education budget and up to7 times the health budget.
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