Local governments are not sovereign, unlike independent nation-states. It is a subordinate government, which derives its existence and power from a law enacted by a superior government. The nature and structure of transactions or interactions between the three tiers of government determine the degree of autonomy. Local government in Nigeria is rooted in historical antecedents of reforms. This paper examines the contradictions in the local government system and suggests that the sustainability of local government autonomy should anchor on improved revenue base adherence to constitutional provisions, political stability accountability and transparency in governance. Local government involves a philosophical commitment to the idea of democratic participation in the governing process at the grassroots level. This implies legal and administrative decentralization of authority and power by a higher level of government to a lower community with a will of its own performing specific functions as with the national framework. Here, we examine these roles in Nigeria with particular emphasis on autonomy, structure and institutional innovations. The methodology adopted here is the content analysis of existing literature on local government and administration in Nigeria. We discuss among others, the 1976 local government reforms which were intended to bring about development at the grassroots level and to revamp the ailing local government system as it were. The creation of more local governments was a major step by the then military administration to achieve this developmental stance and ensure popular participation. We conclude that local government in Nigeria has a crucial role to play in the development process provided there is result-oriented management with a guaranteed operational authority supported by effective local participation.