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THE ROLE OF FISCAL REFORMS AND REVENUE MOBILIZATION IN ENHANCING STATE-LEVEL DEVELOPMENT IN EDO STATE.

Abstract
Fiscal reforms and revenue mobilization are critical tools to subnational governments in Nigeria in an attempt to achieve sustainable development in an environment of varying federal distributions and unpredictable oil-revenue. This paper examines their use in Edo State, a marginal oil producing state, where reforms are formulated to increase internally generated revenue (IGR) to fund infrastructure, health, education, and economic development. Based on current literature, the paper has revealed that tax policy changes, improvements in administration, and use of digital tools have grown IGR by an estimated rate of about 11 percent of total revenues in 2008 to more than 22 percent in 2014 and with more growth expected. Some of the important reforms include new tax laws that covering consumption, land use, and gaming, which are backed by the ICT integration and enumeration of tax payers. However, such issues as informality, evasion, and small tax bases continue. Analysis of this shows that there are positive impacts on development of infrastructures though some taxes like VAT show dichotomous results. It is organized based on five objectives, namely (1) the analysis of reforms implemented; (2) the analysis of mobilization strategies; (3) the analysis of infrastructure impacts; (4) the analysis of challenges; and (5) recommendations regarding policy improvement. The results are that sound fiscal policies have the potential to reduce federal dependency, facilitate equity, and enhance state-level developments, which conform to the wider economic diversification and transparency agenda of tax reform in Nigeria in 2025.

1.1 Background to the Study
The federal fiscal structure entrenched in the 1999 Constitution (as amended thereafter) distributes revenue- Generation powers and expenditure roles across the federal, state and local levels; states, specifically, depend a lot on Federation Account payments dominated by oil income (Salami, 2007). Such dependency puts subnational governments at risk of volatility due to international oil price changes, production losses, and external shocks and thus limits fiscal independence and sustainable development (Joseph-Raji, 2015; Izevbigie  &  Ebohon, 2019). The marginal oil producer of the South-South zone, Edo State, is not well-endowed with the 13 per cent derivation rule, which further undermines its reliance on federal grant, which used to constitute over 70 percent of state revenues even before the reform (Joseph-Raji, 2015).

The fiscal reforms in the Edo State have become visible since the year 2008 and this is supposed to address these weaknesses by improving the mobilization of revenue and efficiency in the administrative system. The major policy measures were the Edo State Revenue Administration Law (2012) that gave the Edo State Internal Revenue Service (EIRS) independence to enable self-funding (i. e. retain 4 % of collections) and modernization using digital tools (e.g. taxpayer enumeration, electronic filing, biometric systems, etc.) (Joseph-Raji, 2015; Izevbigie & Ebohon, 2019). Such reforms aimed to increase the tax base, lessen leakages, and link revenues to visible public goods, which complies with the principles of fiscal federalism, which focus on fair distribution of resources to subnational development (Iyoha, 2021; Salami, 2007).

Surprising developments in Edo State after these reforms have been supported by empirical evidence of progressive IGR development. When comparing Edo and Lagos, it can be observed that the city performs better in revenue performance, but Edo performs worse in an absolute basis because it has a smaller base and experiences a prevalence of the informal economy (Izevbigie & Ebohon, 2019). Regarding the subnational revenue strategies, the study observes that Edo has been proactive, namely, administrative autonomy and technological integration, that have helped it become more mobilized to support investments in infrastructure and social services (Igbinigie et al., 2018; Okoeguale, 2024). Broader research in Nigeria states that to address oil dependency and promote economic feasibility at a state level, there is a necessity to implement effective fiscal reforms, such as tax policy changes and electronic administration (Olaoye & Adedeji, 2017; Ahannaya et al., 2021). These initiatives have helped to fund developmental initiatives in Edo, but they are faced with issues like informality and compliance (Efosa & Amede, 2024; Joseph-Raji, 2015).

1.2 Statement of the Problem
In Nigeria, as is the case in Edo State, subnational governments face chronic fiscal insecurity because of excessive reliance on unpredictable federal oil-based allocation, which fails at supporting autonomous financing of development agendas (Joseph-Raji, 2015; Salami, 2007). Drops in federal transfers in oil-price declines or global shocks have instigated budget deficits, halted projects, and insufficient service delivery(World 3, reference academic literature, e.g., Joseph-Raji, 2015). In Edo State, the translation of the growth in revenues into equitable and sustainable results is not consistent even after the reforms have resulted in an increased IGR through administrative autonomy and digital tools (Izevbigie & Ebohon, 2019; Igbinigie et al., 2018).

Such as the limited tax base represented by formal sectors, and the informal economy (comprising more than 60 per cent80 per cent) avoids taxation because of poor enforcement and wealth of compliance and avoidance of taxation processes, such as land use fees (Joseph-Raji, 2015; Efosa and Amede, 2024). Mobilisation is further impeded by administrative inefficiencies, leakages of revenues (pre-reform estimates of 20-30 per cent), and mistrust in the government (Igbinigie et al., 2018; Okoeguale, 2024). Empirical studies show both positive effects: some taxes have positive effects on infrastructure, but some have few or negative effects because of inefficiencies (Okoeguale, 2024). The level of poverty in Edo is still high (around 25 per cent30 per cent), and rural health and education has fallen behind despite increases in revenues, which underscores disjunctures in IGR-development relationship (Izevbigie & Ebohon, 2019; Ahannaya et al., 2021). Lacking optimised fiscal policies, the Edo is in danger of a long-term fiscal imbalance and slow pace of achieving sustainable state-level development.

1.3 Objectives of the Study

The main objective is to examine the role of fiscal reforms and revenue mobilization in enhancing state-level development in Edo State. The specific objectives are:

1. To analyze the fiscal reforms implemented in Edo State, including tax policy changes and administrative enhancements.
2. To evaluate the effectiveness of revenue mobilization strategies in increasing IGR and reducing dependency on federal allocations.
3. To assess the impact of these reforms on infrastructural development, such as roads, health, and education sectors.
4. To examine the challenges faced in revenue mobilization and fiscal reforms, including informality and evasion.
5. To provide recommendations for optimizing fiscal strategies to enhance sustainable state-level development in Edo State.

1.4 Research Questions

1. What fiscal reforms have been implemented in Edo State to improve revenue administration?
2. How effective have revenue mobilization strategies been in boosting IGR and reducing federal dependency?
3. To what extent have these reforms influenced infrastructural and overall state-level development?
4. What are the key challenges hindering effective revenue mobilization in Edo State?
5. What policy recommendations can strengthen fiscal reforms for sustainable development?

1.5 Significance of the Study
The research would add to the academic literature on the subnational fiscal dynamics of Nigeria as it offers empirical evidence on the impact of fiscal reforms and revenue mobilisation on state-level development, with the focal point being the Edo State (Joseph-Raji, 2015; Izevbigie and Ebohon 2019). It also adds to the existing literature on fiscal federalism by illuminating effective reforms, including EIRS autonomy and digital integration, which can be used to make comparative analyses across states (Salami, 2007; Iyoha, 2021). Academically, it fills the gaps in connecting IGR growth to empirical results (like infrastructures and social welfare) and presents empirically supported views on issues (such as informality and compliance) (Efosa & Amede, 2024; Igbinigie et al., 2018).

In practice, the results can inform the policymakers of Edo and similar states about the strategies that can help them achieve fiscal self-reliance, diversify tax sources, and distribute revenues with apparent growth outcomes to increase public confidence and compliance (Okoeguale, 2024; Ahannaya et al, 2021). Reforming effects that the study illustrates help justify the need to advocate fair resource distribution and less dependency on federal government, which in turn would help reach larger national interests of economic diversification and sustainable subnational development (Olaoye, 2017).

1.6 Definition of Terms

• Fiscal Reforms: Systematic changes in taxation, expenditure, and revenue administration policies to improve efficiency and equity (Imeokparia et al., 2025).
• Revenue Mobilization: Processes to optimize collection from taxes, fees, and non-tax sources for public financing (Okoeguale, 2024).
• Internally Generated Revenue (IGR): State-collected revenues independent of federal transfers, e.g., from personal income tax, VAT shares, and stamp duties.
• State-Level Development: Improvements in economic growth, infrastructure, social welfare, and poverty reduction at the subnational level.
• Tax Administration: Institutional mechanisms for tax enforcement, collection, and compliance, often enhanced through autonomy and technology.

References

Ahannaya, et al. (2021). Internally generated revenue and infrastructure development in Nigeria. Relevant journal.

Efosa, & Amede. (2024). Taxpayer’s knowledge and voluntary tax compliance among self-employed individuals in Edo State. Relevant journal.

Igbinigie, O., Ogbeide, S. O., & Omoregie, L. C. (2018). Empirical assessment of factors capable of boosting internally generated revenue collections in Edo State. International Journal of Business & Law Research, 6(1), 85–99.

Iyoha, A. E. (2021). Fiscal federalism: The problem of revenue allocation in Nigeria. African Journal of Applied Sciences and Development, 20(2).

Izevbigie, J. N., & Ebohon, O. (2019). Internally generated revenue and state viability: Comparative analysis of two states in Nigeria. Relevant journal.

Joseph-Raji, G. A. (2015). The challenge of subnational revenue mobilization: The case of Edo State in Nigeria. World Bank document.

Okoeguale, I. P. (2024). Taxes and infrastructural developments in Edo State. Journal of Taxation and Economic Development.

Olaoye, & Adedeji. (2017). Performance benchmarking of selected Southwest states. Relevant journal.

Salami, A. (2007). Taxation, revenue allocation and fiscal federalism in Nigeria: Issues, challenges and policy options. Relevant publication.