ENVIRONMENTAL ACCOUNTING PRACTICE AND ECONOMIC DEVELOPMENT IN NIGERIA: STUDY OF SELECTED FIRMS IN NIGER DELTA
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ENVIRONMENTAL
ACCOUNTING PRACTICE AND ECONOMIC DEVELOPMENT IN NIGERIA: STUDY OF SELECTED
FIRMS IN NIGER DELTA
ABSTRACT
The purpose of this study is to examine the effect
of the environmental accounting practices on economic development in the oil
and gas sector using selected firms in the Niger Delta Region. In order to
accomplish the purpose of this study the quasi- experimental research design
was employed. A sample size of 104 comprising 52 accountants and 52
environmentalists were randomly selected and questionnaires were issued to
elicit responses from them. The Ordinary Least Square (OLS) of simple
Regression Technique was used to analyze the data. The findings indicate that
there is need for proper accounting for both natural resources and the services
embarked upon by individual, government and oil companies. It helps to
highlight the shortcoming in just accounting for the explicit cost involved in
undertaking developmental projects and tries to ensure that implicit costs as
well as services derivable in forests activities are highlighted. In essence
there is need to ensure that depreciation allowance is made for the natural
assets as well as the man made assets in the national accounts. For further
studies we recommended that study be carried out on how to properly account for
environmental pollution cost in the Niger Delta region and how to avoid waste
while implementing the relevant measures. Also, that study be done to curb the
issue of creating depreciation allowance for natural resources as being done
for manmade assets in the national accounts.
TABLE OF CONTENTS
PAGE
CHAPTER
ONE –GENERAL INTRODUCTION 1
1.1 Overview
of the Study 1
1.2 Statement
of the Study 5
1.3 Purpose
of the Study 7
1.4 Research
Questions 8
1.5 Hypotheses
9
1.6 Significance
of the Study 10
1.7 Scope
of the Study 10
1.8 Limitation
of the Study 11
1.9 Definition
of Terms 11
1.10
Organization of the Study 14
CHAPTER
TWO LITERATURE REVIEW 16
2.0 Introduction 16
2.1 Natural
Resource/Ecological accounting and GDP 16
2.2 Flaws
in the Conventional System of Accounting 17
2.3 Environmental
accounting and economic development 26
2.4 Economic
development in the Niger delta region
of
Nigeria 28
2.5 Environmental
accounting in the Niger Delta region
of Nigeria 34
2.6 Cross
Cultural Comparison of environmental
accounting practice 34
2.7 Laughlin’s
Model of Organizational change and its
Relationship
with Theory 35
Gray
et al Al’S (1995) Theory 35
2.8 Environmental
Advocacy
38
2.9 Impact
of Accounting on Data Availability and
Compatibility 40
CHAPTER
THREE-RESEARCH METHODOLOGY 49
3.0 Introduction 49
3.1 Research
Design 49
3.2 Sampling
Procedure/Sample Size Determination 50
3.3 Data
Collection Method 51
3.4 Operational
Measures of the Variables 52
3.4.1 Model Specification 52
3.5 Test
of Validity and Reliability 54
3.6 Data
Analysis Technique (s) 54
CHAPTER
FOUR-PRESENTATION OF DATA AND ANALYSIS
4.1 Introduction 57
4.2 Data
Presentation 57
4.3 Testing
Research Hypotheses 59
CHAPTER FIVE-DISCUSSIONS, CONCLUSION AND
RECOMMENDATION
5.1 Introduction 69
5.2 Discussion
of Findings 69
5.3 Conclusion 70
5.4 Recommendations 70
5.5 Recommendations
for further studies 71
Bibliography 73
Appendix A 78
Appendix
B-Questionnaire 79
LIST OF TABLES
Table 4.1 Summary of Response 57
Table 4.2: Showing the relationship
between natural
resource /ecological practice and GDP 60
Accounting practice and GDP. 60
Table 4.3: Showing relationship
between natural resource /
Ecological accounting practice and
literacy rate 62
Table 4.4: Showing the relationship
between natural
Resource/ecological accounting
practice and life expectancy 63
Table 4.5: Showing the relationship
between physical/non
monetary accounting practice and GDP 64
Table 4.6: Showing the relationship
between physical/non
Monetary accounting practice and
literacy rate 66
Table 4.7: Showing relationship
between physical /non
Monetary accounting practice and life
expectancy 67
CHAPTER ONE
INTRODUCTION
1.1 OVERVIEW OF THE STUDY
In
this era of green revolution i.e. the era where people are becoming aware of
adopting measures to preserve the ozone layer vis-Ã -vis the technologies in
existence, a lot of innovations are taking place in every sphere of business,
subsequently accounting for the efficiency of such technologies with respect to
the impact on the environment has become a prerequisite for some top niche
firms. While some firms have not started creating alternative techniques to
curb environmental degradation issues during their operations, they are
becoming aware of the immense damage caused by their operations on the
economies of the nations or states where they operate.
There’s
no gain saying the fact that caution should be exercised by firms when carrying
out operations that could give rise to spillages, pollution, erosion, etc. and
subsequently affect the health, life, property, etc of the inhabitants, and
animals in the region. However, caution should also be applied in measuring the
extent of damage caused because some are implicit while others are explicit. It
is this implicit cost suffered by the inhabitant of the region which is
immeasurable that poses a challenge to the field of Environmental Accounting.
The
need to account for the environment and the economy in an integrated way arises
because of the crucial functions of the environment in economic performance and
in the generation of human welfare. These functions include the provision of
natural resources to production and consumption activities, waste absorption by
environmental media and environmental services of life support and other human
amenities (United Nations Handbook of National Accounting 2000:18).
In
the United Nations Hand Book of National Accounting (2002), the committee
posits that conventional national accounts have only partly accounted for these
functions, focusing on market transactions and indicators that reflect
important factors in welfare generation, but they do not measure welfare
itself. According to them, new scarcities of natural resources now threaten the
sustained productivity of the economy, and economic production and consumption
activities may impair environmental quality by overloading natural sinks with
wastes and pollutants. By not accounting for the private and social costs of
the use of natural resources and the degradation of the environment,
conventional accounts may send wrong signals of progress to decision makers who
may then set society on a non-sustainable development path.
Therefore,
in order to incorporating environmental assets in the national accounts they
have suggested the System of National Accounts (SNA) (Commission of the
European Communities and others, 1993), referred to hereinafter as the 1993
SNA, which is an internationally agreed framework for the systematic
compilation and presentation of economic data. It serves purposes of economic
analysis, decision-taking and policy-making. The accounts can be compiled for
successive time periods, providing information for the monitoring, analysis and
evaluation of the performance of an economy over time (1993 SN, Para. 1.1).
According to them a country’s system of national accounts includes two main
categories: flows of goods and
services and stocks of assets sued in the production of goods and services.
Another name for the stocks in capital.
Both stocks and flows are measured in monetary terms. The objective of the
national accounts is thus to measure not only the flows of goods and services
resulting from production (Gross Domestic Product (GDP) or Net Domestic Product
(NDP) but also the capital stock itself, the country’s economic wealth (United
Nations Handbook of National Accounting 2000:18).
Also
they believe that the production of goods and services requires inputs from,
and has effects on, the natural environment. In particular, these effects are
the depletion of resources and the production of wastes which are returned to
the environment. Pollution occurs when these wastes disrupt or change natural
systems, including those that are important for human well-being (for example,
air and water). If the natural environment is conceptualized as a stock of
natural capital, and if its uses for humans are regarded as the services that
flow from this stock, then in principle the use of the natural environment for
economic activity can be accounted for in the same way as the use of other
kinds of capital (for example, manufactured capital, including machines,
buildings and infrastructure) and the products to which they give rise (United
Nations Handbook of National Accounting 2000:18).
Again,
the Nigerian government majorly depends on Gross Domestic Product (GDP) or Net
Domestic Product (NDP) which is largely made up of earnings from the Oil and
Gas sector to finance its developmental projects such as social amenities like
health centres, schools, good road network, water supply, electricity, energy,
urbanization, etc. for its citizens, which enhances economic development. However,
government does not depend on Oil and Gas activities alone to finance its
projects or pay for its expenditure. Sometimes, it resorts to funding from the
agricultural sector, manufacturing sector, and other sectors, whose activities
along with that of Oil and Gas sometimes undermine economic development instead
of enhancing it. There is thus, need for government to create a check and
balance system to ensure that the cost of meeting a social need does not
inhibit the health, cultural heritage, means of livelihood, economy and welfare
of the people it wishes to help.
1.2 STATEMENT
OF THE PROBLEM
Over
the years efforts have been put in place to ensure sustainable accounting
practices with respect to the environment. Whether or not corporations,
government and individual businessmen are complying with regulations cannot be
stated except a thorough analysis is being carried out to determine the extent
of compliance from time to time.
In
the Niger Delta region for instance, in trying to foster development by giving
the people refinery, there is need to carefully assess the policies and
techniques to be employed in order to ensure safe practices and ovoid spillages
and pollution in the environment. This is because there are implicit costs
which may not be detected by the organization carrying out the development
project, but could be suffered by the inhabitants of such a region. It is this
implicit cost that needs to be investigated as well as the explicit costs that
are easily known in ensuring a proper environmental accounting practice.
Otherwise, in trying to provide petrol, fuel, kerosene, etc. for the people,
the technology and processes employed could as well be adding to the economic
problems of both the human and animal inhabitants of such a region. Again,
looking at the recent developments in the Ministries of Environment and Urban
Development in the region, in the bid to urbanize the capital cities they have
added to the economic plight of the citizens more than they ever imagined. The
policies they are implementing have become more hazardous than they could have
facilitated economic development. Instead of going to the rural areas to
develop and urbanize communities, they are concentrating all their efforts in
the capital cities. Is it because they want to work where people will be seeing
their efforts and where they feel safe to work or what is the problem?
It
is thus upon that the trust of this study lies. Specifically, the problems
identified in this study include: to verify the extent to which individuals,
government and corporations are complying with environmental accounting
practices to engender economic development; identifying the factors that
inhibit proper accounting of implicit and explicit cost when it comes to oil
and gas exploratory activities as well as urban planning; how to account for
the extent of relief gotten from the methods adopted to reduce spillages,
pollution, erosion, degradation of human and animal habitats, lose of cultural
heritage, etc.; due to not accounting for the private and social costs of the
use of natural resources and the signals
of progress to decision makers who set society on an non-sustainable
development path.
The
extent of economic development would therefore depend on certain environmental
performance indicators which stand as regulatory patterns for measuring
economic development variables.
1.3 PURPOSE
OF THE STUDY
The
objective of the study subsequently, is to examine the impact of Environmental
Accounting Practices on Economic Development.
The
specific objectives are as follows:
i) To
examine the impact of Natural Resource/Ecological Accounting Practice on GDP;
ii) To
examine the impact physical/Non-Monetary Accounting Practice on GDP.
iii) To
examine the effect of Natural Resource/Ecological Accounting practice on
Literacy Rate.
iv) To
examine the effect of Physical/Non-Monetary Accounting Practice on Literacy
Rate.
v) To
examine the impact of Natural Resource/Ecological Accounting Practice on Life
Expectancy.
vi) To
examine the effect Physical/Non-Monetary Accounting Practice on life
Expectancy.
1.4 RESEARCH
QUESTIONS
In
order to achieve the objectives of this study, the researcher will attempt to
answer this major question: What is the effect of Environmental Accounting
(using the Natural Resource/Ecological Accounting Practice and
Physical/Non-Monetary Accounting Practice indicators as a bases of measurement
modified from the models proposed by Stefan Schaltegger, and Roger Burritt and
OCED),on Economic Development with respect to the GDP, Literacy Rate and Life
Expectancy indices. More specifically, attempt will be made to tackle the
following research questions in order to answer the main research question:
a) What
is the relationship between Natural Resource/Ecological Accounting Practice and
GDP?
b) What
is the relationship between Natural Resource/Ecological Accounting Practice and
Literacy Rate?
c) What
is the relationship between Natural Resource/Ecological Accounting Practice and
Life Expectancy?
d) What
is the relationship between Physical/Non-Monetary Accounting Practice and GDP?
e) What
is the relationship between Physical/Non-Monetary Accounting Practice and
Literacy Rate?
f) What
is the relationship between Physical/Non-Monetary Accounting Practice and Life
Expectancy?
1.5 HYPOTHESES
H01: There
is no significant relationship between Natural Resource/Ecological Accounting
Practice and GDP.
H02: There
is no significant relationship between Natural Resource/Ecological Accounting
Practice and Literacy Rate.
H03: There
is no significant relationship between Natural Resource/Ecological Accounting
Practice and Life Expectancy.
H04: There
is no significant relationship between Physical/Non-Monetary Accounting
Practice and GDP.
H05: There
is no significant relationship between Physical/Non-Monetary Accounting
Practice and Literacy Rate.
H06: There
is no significant relationship between Physical/Non-Monetary Accounting
Practice and Life Expectancy.
1.6 SIGNIFICANCE OF THE STUDY
Without
measuring the level of development eminent in a nation it will be difficult to
ascertain if such a nation is going forward or backwards. It is therefore,
important that in trying to implement health, educational, employment, Research
and Development, Pollution control, oil and gas laws and environmental
protection policies, that business owners, corporate organizations and
government take into cognizance data from past exploratory, environmental,
educational, health, etc. promotional activities, so that their efforts in
providing sustainable development will not turn around to inhibit economic
advancement. It is therefore the import of this study to highlight the efforts
by business owners, corporate organizations and government to foster
development in a nation, using the activities of the oil and gas industry in
the Niger Delta. It also hopes to underline the issues militating against their
smooth operation in terms of compliance to standards.
1.7 SCOPE
OF THE STUDY
This
study will help organizations to direct their investments for minimization of
losses to environment, such as
investment made into the equipment/devices and techniques that help in
reducing potential losses to the environment. This can be easily monetized. It
will also help firms to guard against indirect losses due to their operations
such as losses due to degradation and destruction i.e. loss of biodiversity,
air and water pollution, hazardous waste including bio medical waste, coastal
marine pollution etc; depletion of non-renewable resources; deforestation and
land uses (measuring and monetizing them).
1.8 LIMITATION
OF THE STUDY
This
study was designed to highlight effect of Environmental Accounting on Economic
development in Nigeria. However, it will be narrowed down to the Niger Delta
Region of Nigeria because of insufficient time. It will include comparisons
with Environmental Protection Industry and some other firms in the region whose
activities have some major impact on economic development of the nation.
1.9 DEFINITION
OF TERMS
Environmental Accounting: Inclusion
of indirect costs: the practice of including: the
indirect costs and benefits of a product or activity, e.g. its environmental
effects on health and the economy, along with its direct costs when making
business decisions. Microsoft (R) Encarta(R) 2009. (C)
1993-2008 Microsoft Corporation.
All rights reserved.
Economic Development:
Is the increase in the amount of people in a nation’s population with sustained
growth from a simple, low income economy to a modern, high-income economy. Its
scope includes the process and policies by which a nation improves the
economic, political, and social well- being of its people.
Goncalo
L. Fonsesca at the New School for Social Research defines economic development
as “the analysis of the economic development of nations.
The
University of lowa’s Centre for international Finance and Development states
that:
‘Finance
and Development’ is a term that economists, politicians, and others have used
frequently in the 20th century. The concept, however, has been in
existence in the West for centuries. Modernization, westernization, and
especially industrialization are other terms people have used when discussing
economic development. Although no one is sure when the concept originated, most
people agree that development is closely bound up with the evolution of capitalism
and the demise of feudalism.”
Growth: According Microsoft Encarta Dictionaries
growth means:
1. Growing Process: The process of
becoming larger and more mature through natural development e.g. nutrients
needed for healthy growth.
2. Increase: An increase in numbers, size,
power, or intensity.
Something that growth:
something that grows or has grown e.g. three days’ growth of beard.
Decline:
intransitive verb diminish: to
decrease in number, amount, value, or quality e.g. stocks declining in value;
intransitive verb get weaker: to
become physically or mentally less vigorous, especially because of illness or
advancing year e.g. his health had declined.
Explicit Costs: Are costs that
require outlays of money
Implicit Costs:
These are the opportunity costs of resources the firm’s owner makes available
for production with no direct cash outlays.
Gross Domestic Product (GDP):
The monetary value of all the finished goods and services produced within a
country’s borders in a specific time period, though GDP is usually calculated
on an annual basis. It includes all of private and public consumption,
government outlays, investments and exports that occur within a defined territory.
Literacy:
1. Ability
to read and Write: The ability to read and write to a competent level.
2. Skill
in particular subject: Knowledge of or competent in a subject or area of
activity
Ø Computer
literacy
Ø Emotional
literacy
Life Expectancy:
average expected length of life: the number of years that somebody can be
expected to live, according to statistics.
1.10 ORGANIZATION
OF THE STUDY
This
study is organized into five chapters as follows:
Chapter One introduces
the paper, deals with the Context of the Problem, Statement of the Problem,
Purpose of the study, Research questions, Hypothesis, Significance of the
study, Limitations of the Study and Definition of terms.
Chapter Two
deals with the view of related literature on the subject matter.
Chapter Three
attempts to describe the Research Design, Sampling Procedure/Sample Size
Determination, Data Collection Method, Operational Measures of the Variables
and the Data Analytical Technique.
Chapter Four
deals with Presentation and Analysis of Data.
Chapter Five
presents the Discussion or Conclusion of findings, implications of the Research
Findings, as well as Recommendations and Suggestions for further Research.
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