Fiscal Policy in Nigeria: Any Role for Rules?

Abstract

The views expressed in this Working Paper arc those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Fiscal policy in oil-producing countries can be profoundly affected by oil revenue uncertainty and volatility. Policy formulation should factor in the exhaustibility of the natural resources and aim at reducing oil revenue volatility passed on to the economy. Past fiscal policy in Nigeria has not been successful in this regard, since both revenue and expenditure have been highly volatile, to a large extent reflecting oil price developments. The paper discusses the role an appropriately designed fiscal rule, nested within the long-run sustainable use of oil revenue, could have in providing a more stable framework for fiscal policy formulation. It also highlights practical implementation and transitional issues. JEL Classification Numbers: E62, Q32, Q38, H61