It will require modifying the faction's XML file.

1. Go to (My Documents)\My Games\LegendaryHeroes\Race and find the file named after the faction you want to add city names for.  Say your faction is named "Wolfen" - it will be named "Faction_Wolfen.xml".  Back this file up in case you make a mistake.
2. Open the file with notepad (there are better tools, but if you're only making one simple edit, probably not worth getting them.)
3. Near the top, you'll see some XML that looks like this (I'm only showing the bit where you're going to edit; don't modify any of the rest of the file):

4. Insert your city names so that the XML looks like this, replacing "CapitalCityName" and "SatelliteCityName1", etc. with your own desired names (note that it's VERY important to make sure the tag names use the right casing and are surrounded in the appropriate angle brackets)

5. Save the file
6. Close and restart Legendary Heroes, then start a new game (you can't affect any ongoing games, as the XML gets stored in the saved game.)

 That's basically it.  You may need to do it while the game is running, though, if you have Steam's cloud-sync enabled.

Awesome, thanks.

One query If a city name has a space in it do I need to _ it or will it recognize a space?

It will recognize a space. If you want to look at them, the XML for the core factions is kept in CoreRaceConfigs.XML in C:\Program Files (x86)\Steam\SteamApps\common\FE Legendary Heroes\data\English, and the Empire of the Dead XML is in DLC04_RaceConfigs.XML in the same folder.