FINANCE

This study examine the relationship between financial sector development and income
distribution in Nigeria. Budget deficit financing, which involves borrowing to cover shortfall
between government expenditures and revenues, has been a common practice in Nigeria. This
research aims to analyse how different methods of deficit financing, including domestic and
external borrowing, impact key economic indicators such as GDP growth, inflation and
unemployment rate. The study employs econometric models to evaluate the relationship between
budget deficit financing and economic development. The findings reveal that while domestic
borrowing has a positive and significant effect on economic growth, external borrowing tends to
have a negative impact. Additionally, the study highlights that excessive deficit financing can
lead to higher inflation and increased unemployment rates, thereby hindering sustainable
economic development, For budget deficit financing to contribute positively to Nigeria’s
economic development, it must be managed prudently, with a focus on productive investments
and transparent fiscal policies. Recommendations include enhancing fiscal discipline, improving
revenue generation, and ensuring that borrowed funds are directed towards sectors that
stimulate economic growth and development.