Carbon Accounting and Financial Performance of the Energy Sector in Nigeria

Vollständiger Abstract

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Energy firms in developing countries, such as those in Nigeria, are concerned about the long-term impacts of their actions to reduce greenhouse gas emissions, meet stakeholder demands and combat the effects of climate change. Consequently, there is an increasing concern about how these efforts will affect their bottom line. This paper examined the relationship between carbon reporting practices and the financial performance of quoted Nigerian oil and gas firms (listed on the Nigerian Exchange Group), using stakeholder theory as the foundation of the research methodology. Data for this study consisted of secondary data, specifically all available data collected from 10 publicly traded oil and gas firms from 2014 to 2023, obtained through the review of Annual Reports and Sustainability Reports issued by the Nigerian Exchange Group. Descriptive statistics and Panel Ordinary Least Squares Regression were used to evaluate the data and determine whether a relationship existed. The results indicate a statistically significant, positive relationship between carbon emissions and both earnings per share and stock price. These findings indicate that investors are not environmentally conscious and will be attracted to investments in companies that produce high levels of carbon-based performance. However, the results also demonstrate that the relationship between carbon emissions and return on capital employed is positive but statistically insignificant. Moreover, the findings demonstrate the strategic importance of carbon accounting for firms operating in carbon-intensive industries and conclude that firms should invest in transparent, sustainability-based reporting to ensure that environmental responsibility (climate action) aligns with long-term financial performance.