Nyakang’o blasts counties over Sh125 billion revenue arrears, calls for urgent action

Controller of Budget Margaret Nyakang’o has faulted the 47 counties for failing to curb ballooning revenue arrears amounting to Sh124.95 billion, warning that weak enforcement and political waivers are undermining service delivery.

In her report for the 2024/2025 financial year, Nyakang’o said the arrears, which include billions owed in land rates, house rent and health fund contributions, risk crippling devolved functions if counties do not strengthen recovery measures.

According to the County Governments Implementation Review Report, the total arrears comprise Sh112.47 billion in ordinary own-source revenue, Sh7.46 billion from the Social Health Insurance Fund and Sh5.01 billion from the defunct National Health Insurance Fund (NHIF).

“As of June 30, 2025, county governments reported a total of Sh124.95 billion in outstanding revenue arrears. The amount includes ordinary own-source revenue arrears of Sh112.47 billion, Sh7.46 billion from the Social Health Insurance Fund, and Sh5.01 billion from the defunct National Health Insurance Fund (NHIF),” reads the report.

Nyakang’o said the arrears reflect “persistent challenges in revenue mobilisation, constraining liquidity, delaying service delivery and undermining fiscal sustainability in counties.”

She urged counties to strengthen enforcement mechanisms, adopt automated revenue management systems and address institutional weaknesses, especially in high-revenue potential areas such as Nakuru and Nairobi. She further advised county leadership to collaborate with the Social Health Authority to settle outstanding arrears.

Nairobi County, under Governor Johnson Sakaja, tops the list with Sh63.52 billion, representing 51 per cent of total arrears. These include Sh54 billion in land rates, Sh447.1 million in house and market stall rent, Sh711.1 million from sundry debtors, Sh5 billion in wayleave fees owed by Kenya Power and Sh371.7 million in outdoor advertising and billboard fees.

Nakuru follows with Sh12.59 billion, up from Sh10 billion previously. Governor Susan Kihika’s administration generated only Sh3.65 billion in 2024/2025, slightly higher than Sh3.32 billion the previous year. Despite this, Governor Kihika issued a Sh693 million waiver on rent arrears owed by tenants of county-owned estates in Kivumbini, Bondeni and Flamingo, many of whom had defaulted since devolution. The waiver, Nyakango said, derailed efforts to grow own-source revenue.

For 2025/2026, Nakuru has rolled out measures to recover arrears. These include enforcing the Housing Estates Tenancy and Management Bill, the Revenue Administration Act, the Rating Act, and other laws. The county has also issued demand notices, created a Debt Collection Unit and partnered with the national government to pursue arrears from agencies such as Kenya Railways, Kenya Wildlife Service and the Pyrethrum Processing Company of Kenya.

According to Nyakang’o, Nakuru owes Sh10.5 billion in property rent, Sh697.6 million in house rent, Sh5.7 million in market stall rent, Sh886 million from the Social Health Insurance Fund, and Sh412.9 million from NHIF.

Despite being a city since December 2021, Nakuru continues to struggle with revenue, raising between Sh3 billion and Sh3.6 billion annually. Senate Public Accounts Committee chair Moses Kajwang recently said Nakuru cannot sustain itself as it spends over Sh6 billion annually on salaries and benefits, far exceeding its own-source revenue.

Mombasa recorded Sh13.75 billion, mainly from Sh12.3 billion in plot rates, Sh1.3 billion from the Facility Improvement Fund and Sh110.4 million from single business permits.

Kajiado owes Sh12.09 billion, with significant amounts from Magadi Soda (Sh10.54 billion), Jamii Bora (Sh933.9 million), East African Portland Cement (Sh130.2 million) and Police Sacco (Sh54.1 million).

Smaller counties like Kwale (Sh160.44 million) and Marsabit (Sh30.24 million) have shown little effort in recovering arrears. Other counties with significant arrears include Kakamega (Sh2.4 billion), Kiambu (Sh5.9 billion), Kitui (Sh1.6 billion), Laikipia (Sh1 billion), Siaya (Sh667 million), Nyeri (Sh991 million), Nyandarua (Sh565 million), Makueni (Sh628 million), Homa Bay (Sh723 million) and Bomet (Sh730.6 million).

Nyakang’o’s report warns that without urgent recovery measures, counties risk deepening fiscal stress, leaving them dependent on often delayed national government transfers and undermining essential service delivery.

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