This study investigated the effect of budget deficits on economic growth in Nigeria using time-series data from Central Bank of Nigeria Statistical Bulletin. The dependent variables were Gross Domestic Product (GDP) at current market prices and constant prices, whereas budget deficit was the major independent variable. Different econometric techniques were used in the study, including unit root tests, cointegration analysis, the Granger causality test and Error Correction Model (ECM). The Model One found that 99.8 percent of the variation in GDP at current market prices followed from the variables specified. For lag one, overall surplus had a positive but not statistically significant effect on the real GDP at current market prices, budget deficit also had a positive but not statistically significant effect (approximately 1.25 times higher), budget surplus had a positive and as long as statistically insignificant impact while current surplus was negative but not statistically significantly affect GDP at current market prices 82. Likewise, 99.8 percent of the variation in GDP at constant prices was explained by Model Two variables followed (Table 1). At lag one, overall surplus had a positive and insignificant impact, budget deficit had a positive and insignificant impact on GDP at constant prices; budget surplus would have as positive and significant impact, while current surplus made on negative and insignificant effect. The results of the study establish a significant link between budget deficit and economic growth in Nigeria and proposes that an appropriate balance should be maintained by policy-makers between budget deficits and public expenditure as this would enhance the potential for sustainable growth in Nigeria. 

Keywords: Budget Deficit, Economic Growth, Current Deficit, Overall Deficit, Nigeria.