The study examined the effect of deficit budget financing sources on inflation rate in Nigeria. External debt, Ways and Means Advances, and Treasury Bills were the independent variables of the study, while inflation rate was the dependent variable. The study adopted an ex-post-facto research design, covering the period between 2011 and 2020. Secondary data were extracted from the Central Bank of Nigeria Statistical Bulletin. Ordinary Least Square multiple regression technique was used for the data analysis. In line with the specific objectives of the study which is to ascertain the effect of external debt, ways and means advances, and treasury bills on inflation rate in Nigeria, it was revealed that external debt and treasury bills have a significant effect on inflation rate in Nigeria. Ways and means advances have a positive and significant effect on inflation rate in Nigeria. This implies that among the explanatory variables, ways and means advances is the major determinant of inflation rate in Nigeria. The study recommended therefore that government policies on inflation rate should factor in external debts because of their negative effect on inflation rate. external borrowing should be prudently used in productive activities that can raise investments, reduced inflation and improve the country’s exchange rate. The Government should drastically reduce the rate they borrow from CBN. Any of such borrowing should be targeted towards developing the economy and they should always maintain the credit limit set by the CBN. The government should reduce the number of treasury bills issued to the general populace. Other sources of deficit budget funding, such as privatization of obsolete government institutions, should be considered by the government.
Keywords: External Debt, Inflation Rate, Nigeria, Treasury Bills, ways and means advances
