Decentralisation to locally elected governments has recently become popular as a means to improve incentives of public providers for service delivery to poor people. Yet, empirical evidence on how decentralisation initiatives work in practice is lagging. This paper provides new survey evidence from the health sector in Nigeria, one of the few countries in the developing world to have significantly decentralised both fiscal resources and service delivery responsibilities, on how locally elected governments actually function in delivering basic health services to their citizens. We find evidence of limited accountability at local levels, specifically reflected in the non-payment of salaries of health workers, variation in which cannot be explained by appealing to lack of resources available to local governments. Faced with this evidence, we explore solutions in the context of on-going policy discussions on intergovernmental fiscal relations in Nigeria.