Green Taxation in Emerging Markets: Does Nigeria’s 2025 Tax Reform Advance Climate-Aligned Fiscal Policy

Abstract

Purpose: This study assesses whether Nigeria’s Tax Act (2025) represents a substantive step toward climate-aligned fiscal policy or remains predominantly revenue-driven.

Methodology: Drawing on Institutional Theory and Environmental Fiscal Reform (EFR) Theory, the study develops a nine-dimensional Green Taxation Policy-Scoring Index (GTPSI) to evaluate all green tax dimensions. Using a structured qualitative content analysis, Nigeria’s 2025 Tax Act is comparatively assessed against South Africa, India, and Brazil, which represent explicit, implicit, and hybrid carbon pricing models.

Findings: Nigeria achieves a moderate climate alignment score (14/27), reflecting the introduction of a 5% fossil-fuel surcharge and renewable energy tax protections. However, the absence of revenue earmarking, emission-escalation mechanisms, and institutional integration with the act limits the transformative fiscal impact. Compared to South Africa’s explicit carbon tax framework (22/27), Nigeria’s reform reflects an incremental, implicit carbon pricing model shaped by political and economic constraints.

Originality: The study contributes theoretically by conceptualising implicit carbon pricing as a transitional fiscal pathway for emerging markets and methodologically by introducing a replicable policy-scoring framework for climate-fiscal evaluation. Notably, policy implications suggest that progressive revenue recycling, escalation mechanisms, and institutional quality are necessary to transform revenue-based tax models into effective climate fiscal systems for emerging economies.