ENVIRONMENTAL COSTS AND FINANCIAL PERFORMANCE IN NIGERIA'S SELECTED EXTRACTIVE INDUSTRY

Abstract

The continued depletion of environmental resources in a bid to meet up with human needs coupled with the desire of every business entity to remain profitable has aroused the need to explore the right mix to balance the desire of all stakeholders. This study thus examined the effect of environmental cost on financial performance in the extractive industry in Nigeria. 18 companies listed on the Nigerian Stock Exchange were sampled for the study and secondary data from their annual financial reports for a period of 11 years (2010-2020) was collected and analyzed using panel regression estimation model. Findings from the result (R2 = 0.476728: F-statistic < 0.01) indicates that cost of Environmental variables like Environmental Remediation Cost, Administrative Cost has a positive effect on Financial performance, Business location Cost has a negative and highly significant effect on financial performance while Research and Development Cost and Social Cost has no effect on financial performance of selected sampled extractive industry in Nigeria. The study therefore concluded that Business location Cost exert negative and highly significant effect on financial performance while Research and Development Cost and Social Cost has no significant effect on financial performance of selected sampled extractive industry in Nigeria. Thus, it was recommended that extractive industry in Nigeria should be objective in their financial expenses so as to improve on their performance possibilities.