The paper is a study of fiscal federalism in Nigeria which presupposes management and expenditure of the nation-state, with a particular focus on the challenges surrounding revenue allocation to local governments and the interactions among various tiers of government. Nigeria’s unique federal structure, characterized by a tripartite system comprising the federal, state, and local governments, has generated both opportunities and challenges in the allocation of resources. The allocation of revenue to local governments, which represent the closest level of government to the people, is a fundamental component of effective governance and socio-economic development. However, this process is marred by issues such as inequitable distribution and fiscal dependency based on section 162(6) of the 1999 Constitution as amended. The methodology employed in this study is based on a comprehensive review of secondary data sources. A diverse range of governmental reports, academic papers, policy documents, and statistical data were analyzed which provide a comprehensive overview of the challenges and interactions among various tiers of government in Nigeria’s fiscal federalism. This secondary data analysis facilitates a thorough examination of past and current trends in revenue allocation, intergovernmental relationships, and the impact of policies and reforms. The paper recommends continuing contribution to the ongoing discourse on fiscal federalism in Nigeria for constitutional amendment and provides insights into potential reforms to enhance revenue allocation and the cooperative governance system in Nigeria’s federalism.