CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Taxation has long been recognized as a cornerstone of any sovereign government's
fiscal policy. It is a major source of public revenue, which governments utilize to
fund essential services and undertake developmental projects. Taxation plays
multiple roles including income redistribution, economic stabilization,
encouragement of local industries, and promotion of equitable resource allocation.
Most importantly, it serves as a sustainable avenue for financing infrastructure
development in both developed and developing economies.
In the Nigerian context, over-reliance on crude oil revenues has historically led to
the underutilization of tax as a developmental tool. With fluctuations in global oil
prices and the urgent need to diversify the economy, the Nigerian government—
both at the federal and state levels—has begun to reemphasize the importance of
tax revenue. States like Enugu are now tasked with the responsibility of
strengthening internal revenue mechanisms to finance infrastructure, education,
healthcare, and other public services.
Infrastructure—defined as the fundamental facilities and systems serving a
country, city, or other area—includes services and facilities necessary for its
economy to function. These include roads, bridges, drainage systems, electricity,
water supply, educational institutions, hospitals, and telecommunications. A well-
developed infrastructure fosters economic productivity, enhances the quality of
life, attracts investments, and promotes social integration.
However, in Enugu State, many infrastructural facilities are still below standard.
Poor roads, unstable power supply, inadequate healthcare infrastructure,
insufficient educational facilities, and limited access to clean water remain major
challenges. These infrastructural deficits are often attributed to insufficient public
funding, inefficient tax administration, corruption, and poor project execution.
Between 2023 and 2025, the government of Enugu State has embarked on a
renewed effort to improve infrastructure through internally generated revenue
(IGR), largely sourced from taxes. This period has seen new tax initiatives, reforms
in revenue collection, and the introduction of technology to track and enhance tax
compliance. Thus, it becomes imperative to assess how effective these tax-based
interventions have been in addressing infrastructural deficits in the state.
This study critically examines how taxation has been leveraged by the Enugu State
government to support the repair, construction, and maintenance of infrastructural
facilities. It explores the mechanisms of tax collection, evaluates how tax revenues
are allocated and spent, and investigates the tangible impacts of these taxes on
infrastructure development across different localities in the state.
1.2 Statement of the Problem
Despite the increased emphasis on taxation as a primary source of public revenue,
infrastructural development in Enugu State remains suboptimal. There appears to
be a disconnect between the amount of revenue generated through taxes and the
level of infrastructural development on the ground. This discrepancy raises several
important questions: Are tax revenues being effectively utilized? Are they
sufficient to meet the infrastructural needs of the growing population? Is there
transparency and accountability in tax administration?
The lack of visible infrastructural improvement has resulted in public
disillusionment, low morale among taxpayers, and increased instances of tax
evasion and avoidance. Citizens often question the rationale behind paying taxes
when essential services remain inadequate. This creates a vicious cycle of low
revenue collection and poor public services.
Moreover, there is limited empirical research focusing on the specific role of
taxation in infrastructural development at the state level, especially within the post-
COVID economic recovery era. Enugu State, being a microcosm of the wider
Nigerian fiscal experience, offers a valuable case for understanding how
effectively taxes are used to fund public infrastructure.
Thus, this study is driven by the need to evaluate the impact of tax revenue on
infrastructural development in Enugu State between 2023 and 2025. It aims to
provide answers to critical questions surrounding tax policy, revenue utilization,
infrastructural outcomes, and public perception.
1.3 Objectives of the Study
The primary objective of this study is to assess the role taxation plays in
addressing infrastructural challenges in Enugu State within the timeframe of
2023 to 2025.
The specific objectives are:
1. To examine the trends and sources of tax revenue in Enugu State from
2023 to 2025.
This will involve identifying the types of taxes (e.g., personal income tax,
company tax, property tax, VAT, etc.), their contribution to the state’s
Internally Generated Revenue (IGR), and any changes in collection rates or
policy adjustments during the period.
2. To identify and document major infrastructural projects carried out in
Enugu State within the study period.
These may include road construction and maintenance, public school and
hospital renovations, water supply projects, and expansion of power
infrastructure.
3. To analyze the extent to which tax revenues have contributed to
financing these infrastructural projects.
This involves tracing the funding sources of selected infrastructure projects
and evaluating how much was derived from tax revenues versus other
sources such as grants or loans.
4. To assess the challenges faced in using tax revenues to fund
infrastructural development in the state.
Possible issues may include tax evasion, poor tax administration, corruption,
bureaucratic inefficiencies, and inadequate monitoring systems.
5. To recommend strategies for improving the effectiveness and
transparency of tax utilization for infrastructural development.
This will be based on findings from the research and comparative insights
from best practices in other states or countries.
1.4 Research Questions
This study seeks to answer the following questions:
1. What are the main sources and patterns of tax revenue in Enugu State
between 2023 and 2025?
2. What infrastructural projects were undertaken in Enugu State during this
period?
3. What proportion of these infrastructural projects was financed through tax
revenue?
4. What challenges hinder the effective use of tax revenue in infrastructural
development?
5. What policy recommendations can be made to improve tax efficiency and
infrastructure financing?
1.5 Significance of the Study
This study is significant for several reasons:
For Policy Makers and Government Agencies: The findings will provide
insights into how tax policies and revenue can be effectively utilized to
address infrastructural deficits. It can serve as a foundation for fiscal
planning, tax reforms, and public finance management.
For Tax Authorities and Revenue Boards: The research will offer a
deeper understanding of the bottlenecks in tax collection and the public’s
perception of tax usage, which can inform strategies to improve compliance
and taxpayer morale.
For Citizens and Civil Society Organizations: By showcasing how taxes
are—or are not—used for infrastructure, the study will help foster civic
engagement, accountability, and responsible governance. It can also
empower citizens to demand better service delivery.
For Academia and Researchers: The study will contribute to the growing
literature on public finance, taxation, and development economics. It can
also serve as a reference for further research on state-level fiscal
administration.
1.6 Scope of the Study
The scope of this research is geographically limited to Enugu State, one of the
southeastern states of Nigeria. Thematically, the study focuses on the relationship
between taxation and infrastructural development. The period under review is 2023
to 2025, selected to reflect recent tax reforms and infrastructure-related initiatives.
The study will examine various forms of taxes collected by the Enugu State
Internal Revenue Service (ESIRS) and their application to infrastructural projects
across local government areas. Infrastructure sectors of interest include
transportation (roads and bridges), education (public schools), healthcare (hospitals
and health centers), water supply, and energy.
1.7 Limitations of the Study
While this study aims to provide a comprehensive analysis, certain limitations are
anticipated:
Data Accessibility: Gaining access to complete, accurate, and up-to-date tax
and infrastructure records may be constrained by government bureaucracy
and data confidentiality.
Response Bias: Participants in surveys or interviews, especially public
officials and taxpayers, may withhold information or give socially desirable
responses.
Time Constraints: The limited timeframe of the study may restrict the
depth of fieldwork and scope of project site assessments.
Generalizability: Findings from Enugu State may not be fully generalizable
to other states in Nigeria due to differing tax policies, infrastructure needs,
and political climates.
1.8 Definition of Terms
Taxation: The compulsory financial contribution imposed by a government
on individuals, properties, or companies to finance public expenditures and
services.
Infrastructure: Physical structures and systems that support the operation
of a society or enterprise, such as roads, bridges, electricity, water supply,
schools, and hospitals.
Internally Generated Revenue (IGR): Income generated within a state
from taxes, levies, fees, and other local sources as opposed to federal
allocations.
Tax Evasion: The illegal act of deliberately avoiding the payment of taxes.
Tax Compliance: The willingness and ability of taxpayers to meet tax
obligations in accordance with legal requirements.
Public Finance: The study of government revenue and expenditure and how
these affect the economy.
