Local governments in Nigeria rely on a combination of internal and external revenue sources to finance their diverse functions. Effective financial management in this context requires adherence to the principles of efficiency, effectiveness, and equity. Efficiency emphasizes achieving maximum results at minimal cost, effectiveness ensures expenditures align with set objectives, and equity promotes fairness in resource allocation. However, the application of these principles in many local government councils has been hindered by political interference, financial mismanagement, and corrupt practices among key administrative actors, including council chairmen, councilors, treasurers, and auditors. Such challenges undermine the proper management of revenue and the attainment of developmental goals. The budget serves as a critical tool for planning and controlling financial resources, guiding expenditure toward mandatory functions, cost-efficient capital projects, and improved revenue generation. This study examines the constraints affecting the management of local government finances in Nigeria and underscores the need for transparency, accountability, and strategic budgeting to enhance efficiency and effectiveness in the local government system.