Sovereign Wealth Fund and Fiscal Performance: A Case of Nigeria in the Midst of Other Natural Resources Rich Countries in Africa

Abstract

In spite of several postulations that sovereign wealth fund’s stabilization fund promotes smoothness in the fiscal performance of nations, there are contrary views that it does not. This study investigates the impact of sovereign wealth fund on fiscal performance using Nigeria and 21 other natural resources rich countries in Africa with data spinning from 2003 to 2018. The study made use of Two-Step System GMM and found that sovereign wealth funds have about 0.8 percent positive insignificant impact on the fiscal performance implying that having a sovereign wealth fund in place improves nation's fiscal performance. Consequently, the study recommends that the governments and the management of the various existing funds in Africa should put in more efforts in improving sovereign wealth fund performance; natural resources rich Africa countries without sovereign wealth fund should consider establishing theirs; and the control of corruption, strengthen of financial institutions, reduction in the cost of oil production and increase in general revenue should be taken seriously as they enhance fiscal performance.