IMPACT OF BLUE ACCOUNTING ON THE PROFITABILITY OF LISTED OIL AND GAS FIRMS IN NIGERIA

Abstract

This study critically examines the impact of Blue Accounting on the profitability of listed oil and gas firms in Nigeria, with a particular focus on the influence of water-related sustainability practices encapsulated in the Blue Accounting Index (BAI). The research aims to: evaluate the relationship between the Blue Index and Return on Assets (ROA), assess the effect of Firm Size on ROA, analyses the impact of the Debt Ratio on ROA, and determine how Capital Expenditure (CapEx) influences ROA. The study employs a quantitative research design using panel data regression, drawing from financial statements and Environmental, Social, and Governance (ESG) reports of ten oil and gas companies listed on the Nigerian Exchange Group (NGX) for the period 2018 to 2023. The BAI, developed from firm disclosures on water usage, wastewater treatment, marine ecosystem impacts, and regulatory compliance, serves as the key independent variable, while ROA represents the dependent variable. Firm size, debt ratio, and CapEx are incorporated as control variables to isolate the specific effect of Blue Accounting on profitability. The results of the regression analysis reveal that BlueIndex has a positive and statistically significant effect on ROA (coefficient = 0.00106; p < 0.001), indicating that enhanced transparency and commitment to water sustainability practices are associated with improved firm profitability. Firm Size also exhibits a significant positive relationship with ROA (coefficient = 0.00005; p < 0.001), suggesting that larger firms are more capable of leveraging scale and sustainable operations for better returns. Conversely, the Debt Ratio negatively influences ROA (coefficient = -0.02229; p < 0.001), implying that increased financial leverage may constrain profitability through higher financial risk and cost obligations. Capital Expenditure is found to positively and significantly affect ROA (coefficient = 0.00010; p < 0.001), underscoring the beneficial role of strategic investments, including in environmental infrastructure, on firm performance. The constant term was statistically insignificant, indicating that in the absence of the explanatory variables, ROA remains unchanged. In conclusion, this study provides robust empirical evidence that Blue Accounting particularly in the domain of water governance is not merely a compliance exercise but a strategic driver of financial efficiency and performance among Nigerian oil and gas firms. These findings have significant implications for policymakers, regulators, and corporate stakeholders seeking to align environmental sustainability with financial viability. It is recommended that regulatory bodies encourage the institutionalization of Blue Accounting practices, while firms integrate water-related ESG considerations into their strategic management and investment decision-making frameworks.