Nairobi City County increased its own-source revenue collection during the 2025/26 financial year, but a huge backlog of unpaid revenue, salary obligations and trade payables continued to weigh on its finances, according to the Controller of Budget.
The County collected Sh15.54 billion in own-source revenue during the year, a 14.9 per cent increase from the Sh13.53 billion collected in 2024/25.
The Controller of Budget attributed the improvement to what the report calls “aggressive revenue mobilisation”, particularly through administrative and enforcement measures.
However, the increase in collections was not enough to meet the County’s annual own-source revenue target. The Sh15.54 billion represented 72 per cent of the target.
According to the Controller of Budget, land rates generated the largest share of ordinary own-source revenue at Sh3.42 billion, followed by unified or single business permits at Sh2.73 billion, parking fees at Sh1.80 billion, and plans and inspections, including building permits, at Sh670 million.
Margaret Nyakang’o reported that the County also collected Sh2.87 billion through Facility Improvement Financing, significantly exceeding its annual target of Sh1.24 billion.
Nyakang’o said the disparity “could be an indication of poor targeting in FIF or leakages in other mainstream OSR sources.”
The Controller of Budget also said the use of miscellaneous income sources should be discouraged and revenues should be specifically identified.
Despite efforts to improve collection, Nairobi entered the financial year with revenue arrears of Sh62.77 billion, which had declined to Sh.59.09 billion by June 30, 2026.
Land rates accounted for the bulk of the arrears at Sh.51.34 billion, representing 87 per cent, while wayleaves owed by Kenya Power and Lighting Company stood at Sh5.64 billion.
The County reported that it had introduced administrative and enforcement measures to recover the outstanding amounts.
The report’s findings put revenue collection at the centre of Nairobi’s financial management, particularly as the County seeks to finance services and development from a limited revenue base.
The County also faced pressure in meeting its salary obligations, with personnel expenditure amounting to Sh17.82 billion during the financial year, equivalent to 51.3 per cent of total revenue.
However, salaries were processed for only 10 months, from July 2025 to April 2026. The May and June salaries were not processed because of insufficient budget estimates for personnel emoluments.
The salary pressure was reflected in the County Executive’s use of an overdraft facility with Sidian Bank. By the end of the financial year, the overdraft stood at Sh3.26 billion, attributed to unpaid salaries for May and June.
The County Assembly also had an overdraft facility with Co-operative Bank, with an outstanding balance of Sh.35 million arising from unpaid June salaries.
Nairobi spent Sh33.10 billion on development and recurrent programmes during the financial year, representing 95 per cent of the funds released by the Controller of Budget. Of this amount, Sh3.82 billion went to development programmes, while Sh29.28 billion was spent on recurrent programmes.
Development spending accounted for only 28.5 per cent of the approved development budget, compared with 93.9 per cent absorption of the recurrent budget.
The report says development expenditure fell by 6.6 per cent from Sh4.09 billion in 2024/25 to Sh.3.82 billion in 2025/26. The decline was attributed to cash-flow challenges, including low revenue collection.
At the beginning of the financial year, the County reported trade payables of Sh83.10 billion. The County Executive accounted for Sh82.83 billion of the amount, while the County Assembly owed Sh271.24 million.
During the year, the County Executive settled Sh8.41 billion in trade payables, comprising Sh7.76 billion for recurrent programmes and Sh654.83 million for development programmes.
The County Assembly settled another Sh40.49 million, entirely for recurrent activities.
Despite the payments, outstanding trade payables had risen by June 30, 2026, to Sh85.78 billion for the County Executive and Sh1.12 billion for the County Assembly.
The Controller of Budget also questioned the way some Nairobi expenditure was classified. The County spent Sh2.27 billion under “Other Operating Expenses - Other”, representing 19.79 per cent of its Sh11.47 billion operations and maintenance expenditure.
However, the County did not provide a breakdown for Sh.2.04 billion of the expenditure.
The review found that some expenditure items with clear and unique budget codes had been placed under the general category. These included conference facilities and other expenses.
The Controller of Budget directed that such expenditure be mapped to the appropriate budget codes.
The report also shows that Nairobi spent Sh.685.53 million on domestic travel and Sh164.93 million on foreign travel during the year.
Among the foreign trips listed was a Strategic Human Resource Management and Workforce Transformation Programme in Singapore involving 10 officers, with expenditure of Sh29.92 million.
Nairobi’s 2025/26 financial picture therefore presents two contrasting trends: improved revenue mobilisation alongside persistent financial obligations.
The County collected Sh37.92 billion in total revenue during the year, including Sh21.42 billion from the equitable share, Sh223.82 million in additional allocations and Sh15.54 billion in own-source revenue.
Its approved budget was Sh44.62 billion, comprising Sh.13.42 billion for development and Sh31.2 billion for recurrent programmes.
The Controller of Budget’s findings suggest that while revenue collection improved, the County continued to face the challenge of translating available resources into development spending while managing salaries, debt and accumulated bills.