In the last thirty years, deficit financing has become a major impediment to fiscal balance in the administration of public expenditure in Nigeria. From the middle of the 1980s up to the present, the federal government has consistently overspent its actual revenue accruals and have even borrowed in the pursuit of projects for which she has too little revenue backing. In fact, since the beginning of democratic rule in the current fourth republic, government has increasingly failed to balance its budget with grave consequences for price levels, interest rates, inflation and macroeconomic stability. This paper shows that deficit financing of public expenditure by the Nigerian government is however not a recent issue and that it can be traced to the formative years of Nigeria’s public finance in the colonial period. The paper however argues that unlike the current practice, deficit financing was driven more in the colonial period by the need to build an infrastructure base for the economy rather than on personnel and overhead expenses manifested in the lopsided allocation of the greatest proportion of public revenues to the recurrent budget as it is the practice in Nigeria today
