Theoretical and Empirical Foundations for a Sovereign Wealth Fund Model for Nigeria’s Oil Revenue Management

Nigeria's chronic failure to convert oil revenue windfalls into sustainable national wealth reflects fundamental deficiencies in public finance institutions, and developing a theoretically grounded and empirically validated sovereign wealth fund model tailored to Nigeria's political economy constitutes an original scholarly contribution. This study develops original theoretical and empirical foundations for a sovereign wealth fund model for Nigeria's oil revenue management, drawing on natural resource economics, optimal savings theory, the permanent income hypothesis, and political economy constraints on fund design. The theoretical framework generates original results on the optimal fiscal rule linking savings contributions to commodity price deviation from a reference price, the portfolio allocation frontier for a sovereign fund with both stabilisation and intergenerational equity objectives, and the governance structure optimal under Nigeria's federal fiscal constitution. Empirically, comparative analysis of six sovereign wealth fund models (Norway, Chile, Botswana, Kazakhstan, Kuwait, and the existing Nigeria Sovereign Investment Authority) was conducted using standardised evaluation criteria covering fund design, governance quality, fiscal rule adherence, and investment performance. Primary qualitative data were collected from 25 senior officials at the Ministry of Finance, Central Bank of Nigeria, Nigeria Sovereign Investment Authority, and the Revenue Mobilisation Allocation and Fiscal Commission. Structural equation modelling and qualitative comparative analysis were employed. Results confirm that fiscal rule clarity and governance independence are the two strongest predictors of sovereign wealth fund effectiveness across comparator cases. The study provides original design recommendations for strengthening the Nigeria Sovereign Investment Authority's institutional architecture, contributing to both sovereign wealth fund theory and Nigerian public finance reform.

Keywords: sovereign wealth fund, oil revenue management, permanent income hypothesis, fiscal rule, Nigeria Sovereign Investment Authority