Fiscal federalism deals with the sharing of resources in a federated nation. Over the years problems about local government finance have become an important aspect of intergovernmental relations. Constitutionally, local government is the third tier of government which exists as an independent entity, possessing some degree of autonomy and sovereignty. However, its capability to perform its constitutionally mandated functions is beleaguered by the problem of inadequate revenue. In Nigeria, a number of factors have contributed to the financial setback experienced by most local governments and these include: overdependence on allocations from state and federal governments which in most cases are withheld by the same federal and state governments; lack of fiscal autonomy; creation of non-viable local governments, among others. The aim of this paper is to examine the problems of the local government in Nigeria, especially concerning its financial limitations, necessitated by the unequal share of resources, imbalance revenue-sharing formulae and lack of fiscal autonomy in the operations of the local government in Nigeria.