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PUBLIC HEALTH EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA: THE IMPACT OF GOVERNANCE

CHAPTER ONE

INTRODUCTION

  1. Background of the study

The effect of health on worker‘s productivity suggests a relationship between health and aggregate output. Healthy workers lose less time from work due to ill health and are more productive when working. Health gains had the economic consequences of widespread economic growth and an escape of ill-health traps in poverty (World Health Organization, 1999). There has been a growing interest to extend the relationship between health and economic growth, catalyzed in considerable extent by a 1993 World Bank report on health (World Bank 1993). Barro (1996) comments health is a capital productive asset and an engine of economic growth. Fifty percent of economic growth differentials between developed and developing nation is attributable to ill-health and low life expectancy (World Health Organization, 2005). Developed countries invest a substantial proportion of their budgetary allocations on provision of health care because they are convinced that their residents‘ health can serve as a major driver for economic growth. As health is wealth, no amount spent on health by a nation is considered too much. The United Nation (UN) recommended for a country, an average of 8 to 10 percent of the GDP as benchmark expenditure on health. Governments in Nigeria, over the years have made deliberate efforts at ensuring that there is increase in the level of public expenditure on health. For example, the capital expenditure of government rose from N7.3 million in 1970 to N126.75 in 1987. In 1988 there was a significant rise to N297.96m. The figure rose steadily from N586.2 million in 1993 to N17717.42, N33396.97 and N34647.9m in 2003, 2005 and 2007 respectively. The capital expenditure on health increased from N64922.9 in 2008 to N98211.51 in 2010. In a similar manner, in 1970, recurrent expenditure on health was N12.48 million. This figure rose significantly to N52.79 million and N134.12 million in 1979 and 1986 respectively when the recurrent expenditure percentage of total expenditure stood at 77.4% percent. The value of recurrent health expenditure reduced significantly in 1987 to N41.31m before it rose steadily from N422.80 in 1988 to N24522.27m in 2001. This figure rose again from N40621.42 in 2002 to N44551.63, N58686.56 and N72290.07 in 2005, 2006 and 2007 respectively. By 2008, recurrent expenditure increased from N73990 to N77657.43 in 2010.

1.2 Statement of the problem

Health care expenditure in Nigeria has been on the increase over the years. This is because of the importance of health to nation building and as a facilitator of economic progress. It should however be noted that despite the increase  in government expenditure on health provisions in Nigeria, the contribution of this to human health is still  marginally low. Moreover, the extent and magnitude of its impact on economic growth is yet to be adequately investigated probably because of the general unidirectional impression that economic growth facilitates better health. Off course, for example, economic growth could lead to increased availability of food for better healthy living; increased earning which makes health spending more affordable; and also raises demand for good health services. Higher growth could also imply higher public revenue which can translate into higher investment in health infrastructure. Therefore, there is a question of whether causality exists in the reverse direction?

1.3 Research Objectives

  1. To understand how improved health lead to higher growth?
  2.  To understand to what extent and in what magnitude does health contribute to economic growth especially when one accounts for other potential factors that are empirically known to drive growth?.
  3. To evaluate the growth impact of health expenditure
  4. To determine the extent and magnitude of its contributions to the Nigerian economy

1.4 Research Questions

  1. Does improved health lead to higher growth?
  2.  To what extent and in what magnitude does health contribute to economic growth especially when one accounts for other potential factors that are empirically known to drive growth?
  3. What is the growth impact of health expenditure
  4. What is the extent and magnitude of public health expenditure contributions to the Nigerian economy

1.5 Research Hypothesis

H0: There is no relationship between extent and magnitude of public health expenditure contributions and growth of the Nigerian economy

H1: There is a relationship between extent and magnitude of public health expenditure contributions and growth of the Nigerian economy

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