CLIMATE RELATED FINANCIAL LOSSES AND REPORTING CHALLENGES IN NIGERIA'S OIL AND GAS SECTOR: IMPAIRMENT, PROVISIONS, CONTINGENT LIABILITIES, AND SUSTAINABILITY DISCLOSURE

Climate related financial risk is increasingly relevant to oil dependent economies because it can affect asset valuation, future cash flows, impairment testing, provisions, contingent liabilities, and broader corporate reporting quality. In Nigeria, where the oil and gas sector remains central to public revenue and foreign exchange earnings, the growing exposure to physical climate stress and transition pressure has intensified concern about how climate related losses are recognized and disclosed in financial statements. This review examines the relationship between climate risk, financial loss recognition, and disclosure practices in Nigeria’s oil and gas industry, with particular attention to impairment, provisions, contingent liabilities, and regulatory readiness. A structured literature search covering 2021 to 2026 was conducted to identify recent studies on climate related reporting, gas flaring, sustainability disclosure, and financial reporting implications in the Nigerian and broader oil and gas context. The reviewed literature indicates that while climate related disclosures in financial reports have increased, the depth, consistency, and decision usefulness of those disclosures remain uneven. Several studies show that firms in the oil and gas sector continue to provide limited sustainability information, with climate change and pollution effects often reported in a superficial or fragmented manner. This weak disclosure environment reduces transparency for investors, regulators, and other stakeholders who need to understand the financial consequences of climate exposure. The review also highlights the materiality of gas flaring as both an environmental and economic burden, with recent evidence showing substantial cumulative emissions and large direct revenue losses, thereby reinforcing the financial significance of climate related harm in the sector. In addition, the broader literature suggests that carbon sustainability reporting is increasingly tied to the transition toward net zero and to corporate accountability in high emitting industries. Overall, the review demonstrates that a major gap persists between the economic reality of climate related losses and the way these losses are reflected in financial reporting practice. Strengthening recognition, measurement, disclosure, and enforcement mechanisms is therefore essential for improving reporting quality, supporting informed decision making, and enhancing regulatory credibility in Nigeria’s oil and gas industry.