Petroleum Revenue Management, Fiscal Volatility, and Macroeconomic Stability in Nigeria

This study empirically examines the relationship between petroleum revenue management practices, fiscal volatility, and macroeconomic stability in Nigeria. Nigeria's heavy dependence on petroleum tax revenue exposes its macroeconomic environment to significant boom-bust cycles driven by global oil price fluctuations. The Excess Crude Account and the Sovereign Wealth Fund were established as stabilisation mechanisms, yet their effectiveness in insulating the real economy from oil revenue shocks remains empirically contested. Using a time-series econometric design covering 25 years of Nigerian fiscal and macroeconomic data, the study analyses the relationship between petroleum revenue volatility, government expenditure cyclicality, inflation, exchange rate stability, and GDP growth. GARCH models are employed to estimate revenue volatility, and a VAR framework tests the transmission channels from revenue shocks to macroeconomic outcomes. The study expects to find that petroleum revenue volatility significantly amplifies macroeconomic instability, particularly during periods when the Excess Crude Account balance is low, and that fiscal rules have been insufficiently enforced to break the pro-cyclical expenditure pattern. Contributions include a quantitative assessment of the stabilisation effectiveness of Nigeria's sovereign wealth fund. Recommendations address the constitutional reinforcement of fiscal rules, enhanced savings during oil booms, and the acceleration of non-oil revenue diversification to reduce the macro-fiscal oil dependency. Keywords: petroleum revenue, fiscal volatility, macroeconomic stability, sovereign wealth fund, oil dependence.