The decline in Federal Government of Nigeria’s revenue from crude oil which form the bulk of the statutory allocation to the States led to assessing the effect of internally generated revenue on economic development of selected Local Government Areas in Lagos State. In respect of the analysis, Ordinary least square regression was deployed to generate the Pearson correlation, coefficient of determination (R2 ), adjusted coefficient of determination and one way analysis of variance to analyse data from Local Governments financial statements. The findings indicate that Internally generated revenue of Local Governments do not have significant effect on educational and agricultural development. Significant positive effect was found between Local Government internally generated revenue and infrastructural development. Developmental efforts cannot be left exclusively to funding by Local Governments. The need for consistent external funding was brought to the fore from the findings. If Local Governments are starved of fund by the Federal and State Governments, it will have major negative impact on rural development because Local Governments internally generated revenues are not adequate to meet the rural economic development. 

Keywords: Agriculture, Economic Development, Education, Infrastructure, Local Government, Revenue