Local governments occupy a position of importance in the lives of their residents. This is because local governments are saddled with the responsibilities of providing essential public goods and services which have positive impact and directly affect the day-to-day lives of their inhabitants. Such services include; protection of people‟s lives and properties, establishment and maintenance of schools, health centers, markets, cemeteries, construction of feeder roads and drainage. These statutory functions would not be achieved without adequate fund. In order to finance these primary responsibilities local governments in Nigeria have two sources of revenue, namely, internal and external sources. However, internally generated revenue of local governments in Nigeria is very low and the 1985 federal government committee on the review of local government administration in Nigeria recommended that viable local governments should be capable of generating at least 50% of their annual recurrent expenditure from local sources. It is on this note that this study was carried out to Assess the Capacity of Internally Generated Revenue of Kagarko and Kaduna North Local Governments. The ability to pay theory, benefit receive theory and Max Webber theory of bureaucracy were used to underpin the study. Data were collected using structured questionnaire and semi-structured interview. Quantitative data were analysed using frequency counts and percentages while the Regression analysis was used to measure the degree or level of the effects of independent variable on the dependent variable of the hypotheses through SPSS version 23.0. The study discovered that taxable capacity has significant effect on the IGR of the local governments. The research recommends among other things that there should be organised collection (Database) of the revenue payers through an electronic device such as computer.