All over the world, resource-rich countries like Nigeria that depend on revenues from natural resources to finance annual budgets plan early to insulate themselves from price volatility in the international market and eventual depletion of the resources. Many of these countries do so by setting up stabilization funds to save for the rainy day and for the future of the next generation. This essentially requires a deliberate policy to set aside money earned from natural resources especially during periods of high prices to smoothen expenditure when prices fall.
The stabilization funds also protect these countries against total dependence on natural resources revenue. The essence of saving for the rainy day is that it also helps resource-rich nations to effectively address the resource curse syndrome and the moral burden of generational equity.
In Nigeria, the idea of saving a portion of oil and gas revenues for the rainy day and for the future generation began in 1989 when the Stabilisation Fund was set up. The objective was to set aside 0.5% of revenues going into the Federation Account to support "any state of the Federation that suffers absolute decline in its revenues as a result of circumstances beyond its control.