Through data derived from primary public documents and a critical analysis of secondary sources, this paper investigates the connection between Ethiopia’s adoption of decentralization and the ability of the municipal government of Addis Ababa to provide access to basic services such as water and sanitation to its residents. It finds that while the administrative devolution framework centered on the idea of ethnic federalism pursued in Ethiopia has brought government closer to the people, it has also placed heavy burdens on municipal institutions to provide services that they are ill-equipped to shoulder. This thesis argues that the inability of local administrations to efficiently and equitably provide services to urban consumers is as much a problem emerging from weak institutional capacity as it is a product of limited fiscal capacity and concludes by providing recommendations for Addis that may also be relevant to other similar metropolises in the developing world.