Since 1991 the share of sub-nationaloutlays in total government spending has increased,reflecting their active role in service delivery and greaterautonomy in policy-making and implementation. As a result,sub-national economic policies have taken on an increasinglyimportant role in ensuring macroeconomic stability. Therising share of sub-national finance, including sub-nationalGovernments (SNGs) debt as a share of general public debtabundantly reflects this trend of greater devolution ofspending responsibilities, revenue - raising authority andthe capacity to incur debt. The growing importance of SNGfinances and the recognition that the trend can pose dangersto macroeconomic stability have informed differentinstitutional responses to the difficulties of decentralizeddecision-making, especially addressing the need to improvepolicy coordination across levels of government and containsub-national borrowing. The purpose of this paper is toarticulate some issues in SNG borrowing arising from thepeculiarities of the Nigerian situation. To this end, thepaper is divided into four parts. Part one givesintroduction. Part two outlines the models of control ofsub-national borrowing across the developing and emergingmarket countries. It also highlights Nigeria's effortsin this regard. Part three outlines the structure of fiscalfederalism in Nigeria highlighting constitutional,legislative, and administrative provisions for the sector,revenue allocation, revenue - expenditure gap, while partfour dwells on the leading issues and challenges in SNGborrowing in Nigeria.
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