Carbon Reporting and Profitability of Listed Firms in Nigeria

The financial implications of carbon reporting remain unclear for many Nigerian firms, despite growing global and stakeholder pressure for climate-related disclosures. While environmental reporting is gaining traction, its direct impact on firm profitability in Nigeria is not yet well established. This study examined the effect of carbon reporting on the profitability of listed firms in Nigeria. The population consisted of 151 firms listed on the Nigerian Exchange Group (NGX) as of December 2024. From this, 48 firms in high environmental impact sectors—oil and gas, industrial goods, and consumer goods—were identified. After a screening process, 31 firms met the inclusion criteria. A judgmental sampling technique and a quantitative research approach were employed. Data from 2015 to 2024 were sourced from the firms’ annual reports. Key variables included disclosures of direct, indirect, and other indirect greenhouse gas (GHG) emissions. Profitability was measured using Return on Assets (ROA), with firm size and leverage as control variables. Panel data estimation was conducted using the Ordinary Least Squares (OLS) regression method. Findings revealed that Indirect Greenhouse Gas (INGHG) disclosure has a positive and significant impact on profitability. However, Other Indirect Greenhouse Gas (OIDGHG) disclosure negatively affects profitability, while Direct Greenhouse Gas (DGHG) disclosure showed no significant effect. Firm size was statistically insignificant, whereas leverage had a negative influence. The study concludes that firms should prioritize indirect emission disclosures and critically evaluate the financial implications of reporting other indirect emissions due to their potential negative effects on profitability.