Subsidy is a form of financial aid or incentive provided to an economic sector, individuals, or businesses generally with the aim of promoting economic and social policy. This is usually given in the form of grants, tax freezes, and commodity price reductions.
Subsidies are generally provided by the government to specific industries with the goal of keeping product and service prices low so that people can afford them, as well as encouraging production and consumption.
In Nigeria, fuel subsidies have been in place since the 1970s. Fuel subsidies were formalized in 1977, following the passage of the Price Control Act, which made it illegal to sell certain products (including petrol products) at prices higher than the regulated price. Subsidies were prevalent in Nigeria from 1970 to 1979. Education, health, electricity, water supply, and even air travel. "Essential commodities" such as sugar, rice, milk, wheat, and beverages were heavily subsidized in Nigeria.
Nigeria's energy subsidy regime artificially maintains low daily PMS and electricity tariffs for Nigerian consumers. According to Finance Minister Zainab Ahmed, Nigeria's fuel subsidy costs the country $7 billion per year.
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