Decarbonization Dilemmas and Strategic Tensions in Nigerian Agri-Food Corporate Net-Zero Pledges

Abstract

In Nigeria’s agri-food sector, the transition toward net-zero emissions has introduced a paradox: firms striving for environmental sustainability are increasingly exposed to financial instability. Despite widespread climate pledges, the operational realities of decarbonization remain poorly understood, particularly in emerging markets where infrastructure, energy systems, and regulatory enforcement are underdeveloped. This study investigates the relationship between sustainability transition variables; decarbonization investment intensity, fossil fuel dependence, and ESG regulatory compliance—and earnings volatility among 62 NGX-listed agri-food firms between 2018 and 2023. Using a Strategic Tension Index based on EBITDA volatility, the study employs dynamic panel regression (System GMM), quantile regression, and structural break analysis to capture how strategic commitments to sustainability translate into financial stress. Results reveal that while increased investment in emissions-reduction projects raises short-term volatility, fossil fuel dependence, counterintuitively, correlates with earnings stability, likely due to diesel cost buffering in Nigeria’s weak power grid environment. Moreover, compliance with NGX-mandated ESG disclosure frameworks shows negligible stabilizing effects, pointing to symbolic reporting without operational transformation. These findings confirm Paradox Theory’s central premise: managing sustainability in resource-constrained contexts generates financial contradictions that firms must strategically manage rather than resolve. The study concludes with targeted recommendations, including transitional financing mechanisms, off-grid renewable solutions, and reform of ESG reporting enforcement. By linking financial volatility to the architecture of climate transition in a vulnerable sector, this research offers timely information for policymakers, investors, and corporate leaders seeking a viable pathway to sustainability in emerging economies.