Oil Price Volatility, Fiscal Rules, and Public Investment Efficiency in Nigeria: An Accounting and Public Finance Perspective

This study investigates the relationships among oil price volatility, fiscal rule design, and public investment efficiency in Nigeria, providing an original contribution to the accounting and public finance literature on natural resource revenue management. Nigeria's dependence on oil revenues exposes public finances to severe commodity price shocks, with oil price downturns historically triggering sharp contractions in public investment and infrastructure spending. Fiscal rules, such as oil price-based fiscal anchors and Stabilization Fund provisions, have been proposed as mechanisms for insulating public investment from oil price cycles. However, the effectiveness of Nigeria's existing fiscal rules in protecting public investment quality and efficiency has not been rigorously assessed. This study uses annual public finance data from 1995 to 2023, covering the period before and after multiple fiscal rule adoptions including the Fiscal Responsibility Act 2007, the Sovereign Investment Authority Act 2011, and the Medium-Term Expenditure Framework system. Public investment efficiency is measured using the World Bank Public Investment Management Assessment framework, capital expenditure execution rates, and infrastructure output-input ratios. Structural VAR models and threshold regression techniques are employed to identify non-linear effects of oil price volatility on investment efficiency under different fiscal rule regimes. Results establish that fiscal rules significantly dampen the pro-cyclical response of public investment to oil shocks, but the efficiency benefits are substantially eroded by procurement system weaknesses and off-budget fund diversion. The study contributes an original fiscal rule effectiveness audit model and recommends constitutional entrenchment of a strict public investment efficiency standard with independent verification.

Keywords: oil price volatility, fiscal rules, public investment efficiency, Nigeria, SFEM.