Barriers and Challenges of introducing Environmental Taxation in Nigeria

A Study of Barriers and Challenges of IntroducingEnvironmental Taxation in Nigeria, for future

sustainability

ILIYA GARBA

Lecturer Gombe State University, Nigeria

Kennedy D. Gunawardana

Professor of Accounting

University of Jayewardenepura, Srilanka

[email protected]

ABSTRACT

The paper examines barriers and challenges of introducing environmental taxationin Nigeria which are intensifying pressure on the Federal Government to find ways ofreducing environmental impairment through pollution while minimising harmfuleffect on the economic growth. Amongst the foremost barriers is the obsolete taxpolicy, which does not match the present day reality, lack of requisite expertise toadminister the tax, political rationale etc, despite enough evidence of environmentaldegradation, especially Solid waste disposals, oil spillage in the Niger Delta regionsand Gas flaring by Multinational companies (MNC), pollution caused by cementindustries, effluence and water pollution caused by textiles industries etc. Benefitsreceived and stakeholder theories were used, and data collected through primaryand secondary sources. The results of the study revealed that the industries aremaking mere promises to the government in their effort to control pollution throughregulatory mechanisms without compliance. The researcher recommends thatconsidering the seriousness of this environmental hazards posed by these industries,Federal Government of Nigeria should formulate plans to design a tax process thatmight encompass environmental tax policies, so that the levy of tax be designedplacing its burden on those who are responsible for causing a particularenvironmental problem, or problems and also make provision for statutory

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incentives to minimize administrative cost to the government and compliance costimposed on the tax payers.

Keywords: Environment, taxation, Nigeria, Pollution

INTRODUCTION

Environmental challenges in Nigeria are increasing the pressure

on governments to find ways to reduce environmental damage

while minimising harm to economic growth. (Taiwo) 2013,

Governments have a range of tools and mechanism at their

disposal, including regulations, information programmes,

innovation policies, environmental subsidies and so on,

notwithstanding the environmental problems that are on the

increase day by day.(OECD, 2011).

According to (Schofield) 2009. Taxation is a tool that

government used both to collect revenue and also to prevent and

encourage certain behaviour. As taxation is monetary in nature,

it is equally a good way of encouraging or discouraging country

citizens to behave in a certain way as deemed appropriate by

the government. Throughout the world taxation is used as a

means of encouraging good environmental practices and dissuades

the citizens of the country from practices that could further

damage the environment.

Environmentalism in Nigeria came into the lime light to a

certain degree in the earlier 1970s but mostly in the 1990s to

date, due to pressures of environmental degradation-especially,

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the ozone layer, oil spillage in the Niger Delta region,

pollution by the cement industries and Textile manufacturing

industries. As a mode to carry out government policy, taxation

laws were amended to suit the evolving policies of the day. The

greatest changes came about in the 2010s period as the country

geared itself to suit its policies towards the (Rio +20)

Convention as signatory to it. Crude oil being an

unsustainable substance that ends up impacting on the eco -

system heavily with adverse effect on the environment. The

important and encouraging feature of the industry today is its

commitment and dedication towards steps taken to mitigate

environment pollution that naturally emerges from

industrialization. (Kennedy 2014)

In Nigeria like many other countries around the globe, taxes

play a critical role in ensuring the existence of the nation

and the wellbeing of the people.

Given the significance of taxations, it is very important for

the government at all levels to pay attention to what is

collected , how its collected, who collected what, who

controlled, what is collected, how what is collected is spent

and who is ultimately responsible and accountable to the

taxpayers for their revenue collected and its utilization. To

address these barriers and challenges, and to find ways for

introducing other types of taxes, the national tax policy (NTP)

was approved in January 2010 and sought to provide a set of

guidelines, rules and the modus operandi that will regulate

Nigeria’s tax system, and provide a basis for tax legislation

and tax administrators to discharge their civic

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responsibilities. Over the three years after the NTP it is yet

to be implemented and there is neither a structure in place

to insure its full implementation. (Taiwo 2013).

Research conducted by (GEB 2012), and many scholars in Nigeria

have shown that the existing tax and the new tax that are

imposed, and amongst them is the environmental tax that bespeak

inherent challenges such as:

- The increased demand to grow internally generated revenue,

which has led to the exercise of the power of taxation to

the detriment of the tax payers who suffer multiple

taxations and bear higher tax burden than anticipated.

- Insufficient information available to tax payer on tax

compliance requirement which create uncertainty and

possibility for leakages in the tax system and to be

certain that there could be no room for doubt

- Lack of accountability for tax revenue and its expenditure

- Lack of clarity on taxation powers of each level of

government

- Lack of skilled manpower and inadequate funding leading to

the delegation of revenue officials to the third parties ,

thereby creating uncertainty in the tax system and

increasing the cost of tax compliance

- The non refund of excess taxes to tax payer in time due

to the lack of an efficient system like computers and

data capturing machines ( information mechanisms) etc and

funds

- Non review of tax legislation which has let to obsolete

laws that do not reflect Nigeria’s current realities and

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lack of specific policy direction for tax matters in

Nigeria and the absence of specific procedures laid down

for the authorities encompassing for the operation of

various tax work.

Furthermore, it has been argued by many scholars that those

industries that are opposed to the increase of environmental

regulations such as carbon taxes often focus on concerns

where firms may relocate and /or people might lose their

jobs Taiwo (2013),however, environmental taxes are more

effective than regulation and may even lead to higher

employment. Besides the above challenges and barriers there

are also

Political problems, in Nigeria. Political factors such as

lobbying of those who cause pollution to the environment may

also pose big barriers and challenges to policy makers this

tax administration machinery. That means the politician

might likely dance to the tunes of the owners of the

industries that pollute the environment and therefore,

neglect the welfare and the health of those who vote them to

the power.

For these reasons Barholds (1994) noted that the politician

often prefers regulations with obvious benefit and hidden

costs over regulations with hidden benefits and obvious

costs. This is the obvious reasons why politician often

prefers to hand out permits to firms rather than imposing

tax on them even though the tax is more economically

efficient. Furthermore, on the political issue, when it

comes to the imposition of new taxes, our legislators are

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commonly more interested in the political effect than they

are in the social effects of taxation. They tend to favour

type of taxes which will have the least harmful consequences

upon their standing at the polls. In a democracy there would

appear to be two types of taxation which are fairly

innocuous from a political point of view, it will seems to

be safe to impose direct and ostentatiously heavy taxes on

small group of the very rich. It also seems to be safe to

impose indirect and more or less concealed taxes on the

consumer goods for consumption of the masses. This may

explain the apparent inconsistency of recent tax legislation

which has simultaneously increased the tax burdens of the

very rich and of the very poor, leaving the middle classes

rather leniently. Donfullertone (2004), supports the

idea of Barholds, that targeting tax on goods that are not

environmentally friendly will create costs of measurement,

administrative costs, and compliance, and therefore, for

political reasons polluters prefer to control emission,

pollution and other environment unfriendly activities

directly through command and control regulations such as

standards rather than another tax, environmental tax in

particular.

Smith (1994) asserted that the most common form of

environmental taxes and the one that are fiscally important are

those on energy and transport, which can all be considered as

necessities of modern life style. It is often believed and

supported by empirical evidence – that imposing taxes on such

goods would inflict/encumber heavier burden on the low income

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households, than on the high income households since the low

income households spend a larger share of their income on these

goods. This regression impact of environmental taxes is often

found politically unacceptable and make it difficult to carry

out environmental tax reforms.

Furthermore, Pizer(2002), is of the view that an environmental

taxation cannot guarantee a particular environmental impact, if

introduced, because it cannot ascertain whether polluter’s

behavioural responses may be less or more than expected in case

where the price achievement of environmental target is a high

priority .This paper aims to find the barriers and challenges

of introducing environmental taxation in Nigeria and to suggest

a means by which the tax if implemented will be useful to the

country.

The study focused on environmental tax and how it can be

introduced in order to reduce the rate of pollution produced by

each individual as well as by the industries.

STATEMENT OF RESEARCH PROBLEM

Many forms of taxes are applied in Nigeria among which includes

personal income tax, petroleum profit tax, value added tax;

Education tax et cetera and they have proven success. But

environmental taxation however, is not practiced in Nigeria

whereas it is practiced in other countries like Malaysia ,

Indonesia, U.S.A, UK, South Africa , France, Sweden Viet Nam,

just to mention a few and in these countries environmental

taxation has proved success. Nigeria faced many environmental

degradation/ pollutions such as dust from the cement

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industries, oil spillage in water and farm lands, and air

pollution in the atmosphere, effluent water pollution by

textile and tannery industries, and non biodegradable

polythene bags are common in sight the major cities of

Nigeria. (Uwuigbe 2015), Medical experts have raised alarm that

about 15 million people in Nigeria may have environmental

related disease such as Asthma (WHO 2015), and studies have

shown that 16 percent of Asthma cases among adults have link to

occupational hazards. Especially, those working in cement

industries, textiles, paint making industries and

pharmaceutical industries in Nigeria because they are more

exposed to irritants. (Aderogba 2012), have argued that the

environment was only responding to the misapplications that

affect the environment as a result of human activities. This

includes poor environmental planning policies, poor management

of waste material, in adequacies for the built environment in

urban areas. To find new ways of mitigating these damages is

the primary focus of this study. Provision of requisite frame

work to clean up the environment, is a felt need so that

negatives externalities such as pollution that impacts a cost,

reducing happiness on the victims. Hence, it can be seen as

reduction in the availability of public goods. Clean air,

water, biological diversity, and the global climate, are

examples of public goods (Sandmo 2010). The industries are

expected also to create an enabling environment for workers as

well as inhabitant living in the surrounding area, in spite of

threat health hazards that has inflicted the inhabitants by

the industries like petroleum refineries, cement factories,

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polythene industries, information machines , and political

will for formulating government policy in order to achieve

the objectives in an efficient way, and this can be hindered

by Data gaps an emission source and resistance firms,

influential lobbies leading to political excursion of critical

industry sector or excursion of large informal economic from

the tax at the end of the expiration; (Micheal 2013). Enforced

environmental taxation by the policy maker has led Nigeria to

face a series of challenges when it deals with issues of

optimizing taxation while aiming to reach development target

(Grubb 2014). Nigeria like any other developing country will

benefit from this form of tax if applied in order to negate the

environmental damage of pollution of the industries by

improving the environmental quality as well as revenue

generation of the government can be effected . The frame work

for its practicability stimulates this study. It is desired

that this will fill a void in an environmental degradation and

environmental policy in Nigeria.

Scope of the Study

This research work examines the barriers and challenges in the

process of introducing environmental taxation in Nigeria. The

research is restricted to cement , oil and gas, polythene bags

industries , people living around this industries, with a view

to measuring the rate of pollution in the environment from

air, water, and land, and how these industries are generating

a lot of noxious (injurious) substances which cause threat to

the lives of people, animals and the sustainability of the

eco system, in general.

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Objectives of the Study

The objectives of the study is to examine the introduction of

environmental taxation in Nigeria manufacturing sector

utilizing cement industries, oil and Gas industries,

polythene bags manufacturing companies as samples. The

specific objectives are:

(i). To examine the major challenges of introducing

environmental taxation in Nigeria

(ii To reveal various benefits derived from the introduction of

environmental tax

Research Questions

Research questions serve as guide to the study. On the basis of

the above objectives, the research questions for this study

include the following:

(I). What are the major barriers and challenges of introducing

environmental taxation in Nigeria ?

(ii). What are the benefits derived from the introduction of

environmental tax?

Research Hypothesis

For the purpose of this research the hypotheses to be tested

are stated in their null forms

(i), H0: Barriers and challenges have no significant effects on

the introductions of environmental tax in Nigeria

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(ii). H0: Benefits derived have no significant effects on the

introduction of environmental tax

Literature Review

Environmental issues have emerged in recent decades as a major

aspect of discussion in the problem of economic growth and

development (Jimoh 2013), a policy issue that has been of

particular interest in recent years is environmental tax

reforms, which involves increasing tax on the use of

environment and reducing taxes on other tax bases especially

labour (Coxhead and Chan 2011).

Although environmental taxes are used with increasing frequency

by governments around the world as instrument design to deal

with environmental externalities, we must therefore evaluate

the difficulties in relying on them to correct market failures.

Many economists argue that explicit pollution taxes create

further problems which lead to government failure and little

sustainable improvement in environmental condition. The main

problems are listed below:

I. When assigning the right level of taxation, there are

problems in setting a tax so that the private marginal

cost will exactly equate the social marginal cost,

therefore at this juncture the government cannot

accurately value the private benefits and costs of firms

let alone, putting a monetary value on externalities,

such as the cost of natural habitat and the value of human

life. Without accurate information, setting at the correct

value is virtually impossible. In reality therefore, all

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the governments and regulatory agencies can hope to

achieve is, the movement towards the optimum level of

output.

II. Consumer welfare effect (issues of equity):

Environmental taxes reduce output and raise prices of

goods and service and this may have an adverse effect on

consumer welfare. Producer may be able to pass on the tax

to consumers if the demand for the goods is inelastic and

as a result the tax may have a marginal effect in reducing

demand and final output.

III. Employment and investment consequences:

If environmental tax is raised in one country, say

Nigeria, the producer may likely shift their production to

another country with lower taxes e.g. Ghana. This will not

reduce global pollution and may likely create problems

such as structural unemployment and loss of international

competitiveness. Similarly, higher taxation might lead to

decline in the profit and fall in the volume of investment

projects and in the long term may have beneficial spill

over effects in reducing the energy intensity of an

industry or might lead to innovations which augment/boost

the environment.

IV. It may be cost effective:

For government to switch over from environmental taxation

to direct subsidies to encourage greater innovation in

designing cleaner production technologies

V. The impact of environmental taxes depends crucially on

what is done with the revenues. If they are balanced

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by reducing other taxes through “revenue recycling”, research

suggests that environmental tax could result in an overall

economic improvement.

VI. Measurability: tax on pollution is very hard to measure as

such and it is likely going to be a very big problem.CONCEPT OF STAKEHOLDER THEORIES AND BENEFIT RECIEVED THEORIES

Stakeholder and benefit received theory was used in explaining

the relationship between the companies and the government vis-

a-vis the community in which they operate. The stakeholder

theory holds that effective management requires the balance

consideration and attention to the legitimate interests of all

the stakeholders (Freman 1984), defined as anyone who has “a

stake in or claim on the firm” (Hasnas,1998). This has been

interpreted to include “any group or individuals who can affect

or is affected by the corporation”, especially, in the Niger

delta region where they have their farm land, the water they

drink, and the quality of air they breathe has been polluted by

the Multinational companies (MNCs) in the courses of their

operations. This theory was applied in this paper since the

paper is content analysis, and the theory is helpful to get an

insight of the theories, (understanding) when corporations

deals with issues such as environment.

The second is the Benefit Received Theory derived from the

presumed relationship between the State and taxpayers, and in

which the State is obligated to provide certain goods and

services to the members of the society in compensation for

taxes paid for such supplies (Bhartria, 2009). This theory

addresses the need for government to effectively utilize tax

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revenue in providing economic and social facilities to the

populace, and by extension contributes to economic development.

Although some scholars argue that taxes should be allocated on

the basis of benefits received from government expenditure, it

should be noted that it is impossible to establish a direct qua

pro qua ( in the role of/ in the capacity of) relationship

between tax paid and benefit received from government

expenditure.

Musgrave & Musgrave (2004) and Nzotta (2007) all claim that

taxes have beneficial roles to play in allocation,

distribution, regulatory and stabilizing functions to correct

market imperfection/failure. It can be used as a catalyst to

influence economic activities by influencing private sector

investment decisions, attracting capital inflows, encouraging

and/or prohibiting the production of certain goods and

services, as well as contributing to government revenue and

enhancing economic growth. However, Nwezeaku (2005) argues that

the scope of these functions depends inter alia (among other

things) on the political and economic orientation of the

corporate organization, people, their needs and aspirations as

well as their willingness to pay tax

POLICY GAPS AND CHALLENGES OF ENVIRONMENTAL TAX

Environmental tax reform can be an important tool for facing

current and future environmental challenges related to climate

change, water scarcity, energy security, and general resources

limits (i.e. living within the planets regenerate capacity).

Even a modest tax shift can help to provide positive sign to

the economy by putting the right price on resources making the14

polluter pay and alleviate pressure on more “benign” goods like

labour (Bassi el al 2010). The challenges of climate change,

resources constrains, need for innovation , energy security,

environmental impacts and aging population and, most notably

the current economic and fiscal crisis in Nigeria may together

create the condition for new momentum for broader adoption of

environmental taxation to fit in our laws.

However, environmental tax reform mechanism can only be

implemented if they are acceptable to the public and the policy

maker. There is increasing evidence that unwanted

competitiveness and distributional impacts from the

introduction of environmental tax can be addressed through more

careful design based on sound analysis (EEA 2011).

Clear communication is critical to public acceptance of

environmental taxation such as

i. Lack of knowledge about the overall scheme

ii. Citizens where they are highly sceptical about

government’s claiming, using the fund to reduce other

taxes

iii. The connection between the introduction (and

argumentation) of environmental taxes and reduction in

other taxes was perceived as not necessary/ appropriate.

iv. Environmental taxes may need to be combined with other

policy instruments to address certain environmental issues

Environmental policy and pollution Control in Nigeria

Progress towards bringing about a cleaner environment has

relied on a philosophy of pollution control. This has involved

sometimes costly measures and controversial political

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decisions. As a result, developing countries, poor communities

and financially constrained enterprises have often argued that

the environment is an expensive luxury that diverts resources

from more productive uses. This perspective is giving way to a

new paradigm stating that neglecting the environment can impose

high economic and even financial costs, while many

environmental benefits can in fact be achieved at low cost

(World Bank, 1998).

However, most developing countries have long established laws

and formal governmental structures to address their serious

environmental problems, but a few have been successful in

alleviating those problems (Bell, 2002)

Enactment of regulations is the most common approach to

environmental problems. Standards, bans, permits and quotas are often

favoured by policymakers because they promise certainty of

outcome – without costly monitoring and enforcement, however,

this promise may not be realized, however, experience from

Nigerian environmental policies and implementation has shown

that the traditional command- and-control system (CAC) to

pollution abatement had not produced the desired result in the

context of both economic and environmental policies. Hence,

there is the need to examine the potential of mixed

environmental policies involving the use of market-based

instruments such as environmental taxation to complement the

traditional command-and-control system in achieving economic

efficiency in the use of the resource.

The policy makers to be better informed on everything what they

need to do is to make the market -based instrument work or else

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they would have little to show for their efforts in terms of a

cleaner environment. Hence, policy makers need to understand

the extent to which resource and environmental conditions

impinge upon macroeconomic performance. Bad resource policies

can actually hurt long-run economic growth by dissipating the

wealth inherent in natural resource stocks. Excessive pollution

levels not only damage economic assets but also are injurious

to human health. Excessive levels of pollution-linked illness

results in loss productivity, and excess levels of mortality

imply substantial welfare loss.

Trend in Pollution and Pollution Loads by Domestic and

Industrial Effluents in Nigeria

The discharge of wastewater into surface sources of water and

the resultant deleterious changes in water ecology have been

reported by several researchers (Law, 2010; Okoronkwo and

Odeyemi, 2013; Odokuma and Okpokwasili, 2013) who also have

expressed concern over human health and the possible

accumulation of human enteric pathogenic microorganisms by

aquatic organisms.

Incidences of water-borne diseases in rural areas of developing

countries leading to millions of deaths have been reported

(UNU, 2010). Some of these deaths have been traced to the use

of water grossly polluted by untreated waste (De Silva et al,

2008; UNEP, 2011).

Akpata and Ekundayo (2009) also reported an increase in the

number of total coli forms and of E.Coli in particular, when

solid faecal matter get added to Lagos lagoon. Okoronkwo and

Odeyemi, (1985) as cited by (Joseph 2013), reported a similar

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trend in the pollution of a stream by wastewater from a sewage

lagoon. Egborge and Benka-Coker (2014) also reported relatively

higher faecal coliform loads at stations on Warri River in

Nigeria that received faecal matter from slaughterhouses and

raw sewage from human sources. Textile industries discharge

toxic waste materials through the water from those industries

which runs to drainage systems and affect the aquatic

organisms

The discharge of wastewater from bathrooms, laundries,

slaughterhouses et cetera have been cited to explain the

degradation due to contamination of most tropical rivers as

they pass through inhabited places (Oluwande et al, 2013). The

condition, pollution load and effluent effects on water sources

in Nigeria

Table below shows the Ten top diseases which are predominately

associated with poor water quality.

Report of the ten top diseases in Nigeria

Table 1: Ten top diseases from sample hospitals recorded in

North West Nigeria

Rank Type of

diseases

Recorded cases Percentage %

1 Diarrhoea 4590 252 Malaria 3390 18.53 pneumonia 2139 11.74 Tuberculosis 2058 11.25 Eye disease 1377 7.56 Measles’ 1263 6.97 Malnutrition 990 5.4

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8 Anaemia 954 5.29 Hypertension 942 5.110 Hernia 652 3.5

Total 18,360 100%Source: Kojogbola(2014) Nigeria environmental study action team

According to Kojogbola(2014), the leading killer diseases in

the region are mostly due to poor solid waste management

related condition and it is precipitated by ignorance,

poverty, and low standard of living. of the populace

A number of studies (World Bank, 2013; Brockehoff, 2012;

Hoddinott, 2013) have been carried out at one time or other

that examined the impact of water pollution on variables that

determines health status of the household members. Most of the

studies hypothesized that an improvement in water quality has a

direct effect on people’s health via reduced exposure to water-

associated (water borne) diseases.

Patronage of hospitals and other health care facilities in

Nigeria is on the increase. The rapidly increasing populations

coupled with the deteriorating environmental conditions are

some of the factors responsible for this trend (Sangodoyin,

2014). Hospital records have confirmed that high incidence of

typhoid, cholera, dysentery, infectious hepatitis and guinea

worm in urban settlements of Nigeria.

Of all the costs of urban environmental degradation, impairment

to human health is by far the highest. There is a direct link

between urban environmental degradation and public health in

terms of water related diseases such as diarrhea, dysentery,

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cholera and typhoid. The rapid growth of urban centres in

Nigeria, coupled with the development of unstructured

infrastructural and social services have created an adverse

environmental situation in many parts of the country which is

becoming detrimental to healthy living.

Market-Based Instruments for Pollution Abatement in Nigeria

– Merits

And Challenges

The market based approach to environmental management is

concerned with creating conditions in which the production

of goods and services can flourish with the support of an

enabling environment for private sector activity and an

economic framework of incentives and reward for good

organizational performance.

Environmental management in Nigeria was until now characterized

by a “command and control” approach. The limitations of this

approach included an acute shortage of government funds,

managerial skills and administrative enforcement capacities.

Hence, the use of economic and financial instruments to

complement the traditional command-and-control system, CACs

(Command and Control) often require much more detailed

information on regulated industries than would EIs,( Economic

Instruments)

The government has to understand the details of industrial

technologies in order to set standards. Since set standards

involve fee collection or permit sales, many EIs rely more on

supportive infrastructures such as functioning markets, tax,

and fiscal payments systems than CACs.( Command and Control).

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In order to overcome some of these difficulties it also

requires help in achieving economic efficiency in the use of

the resource.

The market-based instruments approach involve setting up

appropriate taxes and pollution charges on potential sources of

pollutants that is above the marginal cost of pollution control

to or above the environmental cost than their pollutants

impose on the affected population or the communities. The

environmental taxes and charges would have the simultaneous

benefit of generating financial resources while also acting as

disincentives to those who perpetrate

/effect pollution. This include emission charges or taxes based

on the quantity and quality of pollutants discharged (water

effluent charges).

The pollution levy system would involve imposing charges only

for pollutants that exceeded emissions standards by the

Nigerian Federal Environmental Protection Agency and then only

for the one pollutant most in violation. To provide incentives

for enterprises to further reduce the within-standard pollutant

discharges into water, a fee is also charged on the total

quantity of wastewater discharged into river bodies.

The major challenges to the adoption of the market-based

instruments approach in Nigeria include the need for an

accurate monitoring network, transparency, a working legal

system and a realistic incentive to trade. Other challenges

include corruption, favouritism and poor environmental

enforcement. In addition, other unique challenges include the

fact that there are fewer trained people and the best people

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tend to be concentrated in capitals rather than in field work,

equipment for monitoring and data collection are scarce and

most basic data are unreliable.

Other limitations include high administrative and transaction

costs as implementation of economic instruments entails

significant administrative and transaction costs. The market-

based instruments approach require some monitoring such as

effluent fees and this monitoring is more complex and more

expensive than required (stipulated) by regulation. Another

challenge is the fact that the use of economic instruments may

be complicated by several types of uncertainties as the

marginal abatement cost functions need to be known, or else

effluent charges on polluting activity cannot be estimated

effectively.

However, despite the challenges of the market-based instruments

approach enumerated above, the system still offers high

potential for efficient and cost-effective environmental

management approach in Nigeria when mixed with the traditional

“command and control” system. Hence, the argument for economic

instruments as mentioned above suggests that the efficiency

gains from their use are an outcome of incentives for pollution

abatement innovations and the ability of firms to reduce

emissions in the most cost-effective manner. However, as the

impediments to the use of economic instruments indicate, in

practice such instruments would require substantial government

involvement and significant administrative costs.

Nigerian Environmental Regulation and the Challenge of

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Sustainable Development

Sustainable development poses important questions as to how

economic growth is conceived and managed through incentives and

regulation in any country. The examination of environmental

regulation and sustainable development principles in Nigeria

shows that the nation need to integrate the principles of

sustainable development into the country’s policies and

programmes in order to reverse the loss of environmental

resources. In spite of the fact that the country has now

embraced the concept of sustainable development, Nigeria is far

from pursuing the normal goals and objectives contained in

sustainable efforts at developments. The observed impediments

are as follows;

I .There is the absence of appropriate national guidelines and

standards on environmental pollution and natural resources

conservation, although some progress was made in this direction

by FEPA (2010). This implies that pollution problems and the

damage to the environment cannot be adequately monitored and

enforced especially in the industrial sector.

ii. There is the general absence of effective resource pricing

instruments for resource conservation and nature protection.

The major implication is that resources are still being

wantonly exploited by individuals, groups, communities and

corporate bodies without any concern for environmental damage.

iii. Appropriate instruments and techniques for environmental

damage costing especially, one that takes into consideration

damage to the value of natural ecosystems is yet to be fully

developed in Nigeria. Without this, it would be difficult to

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speak of attaining both a balance and compatibility between

resource conservation and economic growth.

Iv. There is the absence of economic incentives and

disincentives for natural resources conservation and

environmental management.

V. There is the absence of a system of national resources

accounting and auditing especially one that takes reversible

and irreversible damage to the environment into account.

Revenue Generated from Companies vs

Expenditure incurred

Corporate tax is a tax payable for each year of assessment out

of the profit of any company at the rate of 30%. This includes

profit accruing in derived from, brought into or received from

a trade, business or investment. Also company paying dividend

to its share holders are first obliged to pay tax on its

profits on the company tax rate. Nigerian revenue in the 2013

fiscal year through company income tax amounted to N816.45

Billion which is above the budgeted amount of N744.03 Billion.

This represents an excess of N72.42 Billion (Okonja 2015).

Furthermore, the revenue generated in 2014 from the company

income tax amounted to N1.18 trillion, which is more than that

of 2013 fiscal year.

TABALE II

CORPORATE TAXATION IN NIGERIA PAYABLE BY POLLUTING INDUSTRIES

(2011- 2014)

S/N INDUSTRIES 2014 N000 2013N000 2012N000 2011N0001 MOBIL OIL PLC 1,536,118 1,224,190 825,032 633,542

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2 CON OIL PLC 1,230,954.6

0

1,472,596 1,461,230 1,908,388

3 OANDO PLC 4,945,879 3,415,176 2,399,386 1,333,3334 DANGOTE CEMENT 5,270,947 2,383,641 3,258,711 4,664,6755 ASHAKA CEMENT 5,457,357 4,673,214 4,067,823 2,432,7906 SOKOTO CEMENT 341,365 262,178 194,767 75,6037 LAFARGE CEMENT 6,532,311 5,183,429 1,454,576 293,7898 POLY PRODUCT 22,696 19,428 13,481 11,6579 AVON CROWN CAPS 68,965 86,354 145,712 70,29110 NIGER BERGCO PLC 57,678 60,339 97,713 87,192

TOTAL 25,465,271.

60

18,780,546 13,918,431 11,519,260

SOURCE: NSEC FACT BOOK 2014

The data for the ten companies showing their total tax

remittance to federal government is shown in Table II. The

results show increase revenue of companies year by year

Therefore; this research aims at to find if there is

relationship between revenue generated and expenditure incurred

by the Federal Government of Nigeria on Health. For this reason

the researcher used the Federal Government Budget made to the

Federal Ministry of Health from 2011- 2014. Based on the

budgeted expenditure, the Federal Government budgeted at less

than 10 percent of its annual budget to the health sector. See

Table III.

The researcher found out that there is an inverse relationship

between tax collection by the companies and expenditure

incurred by the Federal Ministry of Health which shows that

government is spending more on the welfare of the population in

terms of provision of medical facilities to the teaming

population than on revenue generated by these companies?

25

TABLE III

FEDERAL GOVERNMENT OF NIGERIA BUDGET (2011 – 2014)

FEDERAL MINISTRY OF HEALTHS/N EXPENDITURE 2011 % 2012 % 2013 % 2014 %

1 TOT PERSONAL

COST

104,566,02

3.50

129,433,03

0.45

215,837,24

1.63

205,337.40

2 TOT OVER

HEAD COST

3,374,412.

80

4,789,346,

540

7,229,354.

79

5,343,210.

50

3 TOT

RECCURENT

COST

84,974,450

.00

104,544,20

1.05

223,066,69

6.42

190,965,32

2.76

4 TOT CAPITAL

COST

30,855,213

.12

48,783,221

.50

55,753,596

.38

65,766,322

.76

5 TOT

ALLOCATION

223,770,09

9.42

7 282,760,45

3.00

7 278,819,99

1.79

5 262,280,00

0.00

6

SOURCE: FEDERAL MINISTRY OF HEALTH 2015

From the above table it can be seen that the Federal Government

budget is less than 10 percent of its total budget on health

and this under funding has also led to a large number of

health problems.

26

27

METHODOLOGY

Data for this study was collected through annual report and

financial statement of these companies in the Nigerian stock

exchange market fact book (NSE) 2014, as well as Federal

Government of Nigeria budget speech 2015, through Federal

Ministry of Finance bulletin and Federal Inland Revenue

Service (FIRS), Furthermore, the people residing in

industrial locations were also chosen as one for the

population study, because they are the ones who are worst

affected as a result of activities and operational work of

these industries. The targeted population of this study

comprises of residents who are 18 years and above. According

to World Health Organization report 2015 about 15 million

were affected by various kinds of environmental pollution in

Nigeria. In view of the researcher’s inability to reach out

to the entire population the research employed the Yaro

Yamani formula in determining the population size. Using the

Yaro Yamani formula n = N/ [1 + (Ne2)]

Where n = is the sample size, N = is the population, e = is

the error limit (0.05 on the basis of 95 percent confidence

level

Therefore, n = 15,000,000 /1 + 15,000,000 x (0.05)2

n = 15,000,000/37501

28

n = 400

When using a population of 15,000,000 for the study with an

error limit of 5 percent, a sample size of 400 is therefore

considered adequate as computed above. A well organized

constructed close- ended questionnaire is designed and

administered to provide answer emerging from the analysis of

the problem.

Data Analysis and Discussion of Findings

Table 1: Barriers and Challenges have no significant effecton the introduction of

Environmental tax in Nigeria

OptionsFrequen

cy PercentValid

PercentCumulativePercent

Valid Strongly Agree 15 7.2 7.2 7.2Agree 21 10.1 10.1 17.3

Undecided 20 9.6 9.6 26.9Disagree 84 40.4 40.4 67.3

Strongly Disagree 68 32.7 32.7 100.0Total 208 100.0 100.0  

Source: Fieldsurvey( 2015)  

From the table above, the following can be deduced out of the

400 copies of questionnaire administered to the respondents,

29

231 were returned with 23damaged, therefore a total of 208

copies which represent 52 percent were used for the analysis.

15 respondents and 21 which represent 7.2 percent of the

respondents have strongly agreed or agreed with opinion that

barriers and challenges have no significant effect on the

introduction of environmental taxation. However, regardless of

this representation by the respondents on the above subject

matter 20 representing 9.6 percent of the respondents remain

undecided, and another 84 which represent 40.4 percent

disagreed and 32.7 percent strongly disagreed with the opinion

that Barriers and Challenges have no significant effect on

introduction of the tax from the result obtained, although over

67.3 percent of the respondents disagreed or strongly

disagreed with the notion that Barriers and Challenges have no

significant effect on the introduction of environmental tax,

there is still about 17.3 percent who agreed or strongly

agreed but, it is valid to conclude that Barriers and

Challenges have no significant effect on the introduction of

environmental tax.

Table 2: Benefits derived have no Significant Effect on theIntroduction of

Environmental Tax in Nigeria

OptionsFrequen

cyPercen

tValid

PercentCumulativePercent

Valid StronglyAgree 6 2.9 2.9 2.9Agree 2 1.0 1.0 3.9

Undecided 10 4.8 4.8 8.7Disagree 112 53.8 53.8 62.6StronglyDisagree 78 37.5 37.5 100.0

30

Total 208 100.0 100.0  Source: Field survey(2015)

From the results obtained above, the following can be

deduced. Out of 208 respondents used for the analysis, 190

represents 3.9 percent of the total respondents as either

agreed or strongly agreed with the notion to great extent,

that the benefits derived from environment tax have no

significant effect on the introduction of the tax,

nevertheless, regardless of this representation by the

respondents on the above subject matter, 10 respondents

which represent 4.8 percent were undecided or indifferent,

while 112 represent 53.8percent as either disagreed or

strongly disagreed. Therefore, from the results obtained it

is affirmative with certainty to conclude that Benefits

derived from introduction of environmental tax has no

significant effect on the tax. This is based on the fact

that a large percentage (62.8 percent) of the respondents is

in concurrence with the argument that Benefits derived on

environmental tax has no significant effect on the

introduction of the tax.

CONCLUSION AND RECCOMENDATIONS

This study concludes that pollution has been an issue of

concern all over the world including Nigeria, especially in the

covered areas under the study. Therefore, Barriers and

Challenges should not be bases for allowing the industries to

keep continuing pollution of the environment leaving the

inhabitant in extreme danger, and transfer the burden of social

cost to the government. Environmental taxes if introduced it

31

will also have the added “green” dividend of encouraging

technological innovations towards a cleaner environment and

efficiently regulating environmental protection efforts,

especially as an effective and efficient complement to other

regulatory efforts. The study therefore recommends that the

Federal Inland Revenue Service should embark on massive public

awareness programmes in order to educate the general public

about the environmental taxation, enlightening them that the

tax should be designed in such a way that will place the burden

of tax on those responsible for causing a particular

environmental problem, explaining that, this point is related

to fairness and not to incentives and the government should

design a tax that may coordinate environment and tax policies

and also the tax policy may be designed to place the tax

burden heavily on those responsible for the particular

environmental problem, and finally Environmental taxation will

be more politically accepted, if it will contain a

redistribution factor i.e. transferring wealth such as from the

richer section of the economy , and the industries to the

poorer section of the economy, the masses, as well as vital

role in stimulating a more environmentally sustainable economy

in Nigeria .

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