Environmental Costs and Key Financial Performance Indicators of Oil Firms in Nigeria

Abstract

This study examined the effect of environmental costs on the key financial performance indicators of oil firms in Nigeria. The study specifically examined the effect of environmental cost on the retained earnings, earnings per share and the return on asset of oil firms in Nigeria. A sample of three firms was selected out of a population of eleven oil and gas firms listed on the Nigeria Stock Exchange during the period. Secondary data were collected from the selected firms and analysed using multiple regression analysis. Findings of the analysis shows that environmental cost has a positive and insignificant effect on the retained earnings of oil firms in Nigeria. It was also observed that environmental cost has a negative and insignificant effect on the earnings per share of oil firms in Nigeria. The study equally revealed that environmental cost has a positive and significant effect on the return on asset of oil firms in Nigeria based on the findings, the study recommends that oil firms should adopt uniform reporting and disclosure standards of environmental cost for the purpose of control and measurement of performance. Firms (especially smaller ones), should be encouraged to disclose their environmental practices in their annual reports to enhance their competitiveness which would subsequently lead to high corporate performance. Top management should ensure that they comply with the environmental laws of the nation as it will go a long way in enhancing sustainability.