SEVERANCE TAXATION AND ENVIRONMENTAL PERFORMANCE IN NIGERIA: A CRITICAL ANALYSIS
Keywords:
Severance taxation, environmental performance, resource taxation, extractive industries, Nigeria, environmental policy.Abstract
Natural resource extraction continues to be a significant driver of economic growth in resource-rich countries; however, it often leads to considerable environmental degradation. This study investigates the potential of severance taxation as a policy tool to promote optimal environmental performance within Nigeria's extractive industries. Employing a quantitative research design and Structural Equation Method, the research assesses how severance taxes can internalize environmental externalities, deter excessive extraction, and fund environmental restoration efforts. Additionally, the paper evaluates Nigeria's current fiscal framework, including petroleum profit taxes and hydrocarbon taxation as stipulated in the Petroleum Industry Act of 2021. Findings indicate that while Nigeria has numerous resource-related taxes, the lack of a targeted severance tax framework hampers the country’s capacity to effectively mitigate environmental degradation resulting from extraction activities. The study advocates for a hybrid severance taxation model that aligns environmental performance indicators with extraction-based taxation. Ultimately, the research concludes that implementing a well-structured severance tax regime could enhance environmental sustainability, improve revenue allocation for environmental remediation, and strengthen regulatory oversight of the extractive industries.References
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