Environmental Taxation and Sustainable Development in Nigerian Oil And Gas Firms: Can Green Taxes Enhance Revenue and Reduce Degradation?

Abstract

This study examines the potential of environmental taxation, particularly green taxes, to promote sustainable development in Nigeria's oil and gas sector. Specifically, it examines whether green taxes can serve as effective instruments to increase government revenue and mitigate environmental degradation from oil and gas operations. Anchored on the Pigouvian Tax Theory, which advocates taxation of negative externalities to correct market failures, the study utilizes panel data from selected oil and gas firms in Nigeria over a defined period. Using multiple regression analysis, the findings reveal a statistically significant positive relationship between green taxes and government revenue, suggesting that environmental taxes can strengthen public finances if effectively enforced. Additionally, green taxes show a significant negative relationship with environmental degradation, indicating their potential to incentivize cleaner industrial practices and reduce ecological harm. These results are consistent with both a priori expectations and supporting empirical evidence, highlighting the dual fiscal and environmental benefits of green taxation. The study recommends institutionalizing a pollution-sensitive green tax policy framework and strengthening regulatory enforcement to ensure compliance. It concludes that environmental taxation, when well-designed and transparently managed, can be a powerful policy tool for Nigeria to achieve its sustainable development goals, especially in the extractive sector.