If you are facing the same issue, do the following:
1. Open Themes app and select the default theme (Check all the options in the bottom like Lockscreen, Homescreen, System and Icons). Refer screenshot 1.
2. Now restart phone.
3. Open Wallpaper Carousel app (Settings / Lock screen & password / Wallpaper Carousel) and Turn on.
4. Add Wallpaper Carousel to Autostart (Settings / Permissions / Autostart).
5. Restart phone and like after 30 min press the powerkey and you should see the lockscreen is displaying different different wallpapers (That is Wallpaper carousel app is working properly)
We really do not like the default theme so if you like to install any other theme then before applying the theme, please uncheck 'Lockscreen' and apply and restart phone and you'll find the lockscreen changes wallpapers. If you select the 'Lockscreen' and then apply the non default/custom theme, what happens is, the wallpaper carousel will be unlinked and the theme forces its own wallpaper hence you will be find the wallpaper carousel is not working. I have spend days to understand this logic and wanted to share this info to help you all.
P.S: Some says it wallpaper carousel works only on Default Launcher. This is not true as it is working on my All time favorite 'Lightning Launcher'.