Impact Of Government Healthcare Funding On Nigeria Economic Growth

Project and Seminar Material for Economics

Impact Of Government Healthcare Funding On Nigeria Economic Growth

Chapter One


1.1 Background to 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 that health is a capital productive asset and an engine of economic growth. Fifty percent of economic growth differentials between developed and developing nations is attributable to ill-health and low life expectancy.

Health is one of the most important factors that determine the quality of human capital, a necessary factor for economic growth. In line with the above, a consensus of opinion have been formed among researchers recognizing health as a public good, the demand and supply of which cannot be left at the mercy of invisible hands or profit maximizing individual as well as on considerations of utility maximizing conduct alone . Hence, the need for the government to play a major role in delivering good and qualitative healthcare services that is accessible and affordable for the teeming population. The recognition of the importance of the above led the World Health Organisation (WHO) to propose at the 2010 World Health Assembly, issues that will address financing of health, which will ensure qualitative and affordable healthcare services (Ataguba and Akazili, 2010).

The pattern of health financing is therefore closely and indivisibly linked to the quality of health outcomes (health status), capable of achieving the long term goal of enhancing a nation’s economic development (Riman, 2012). Alluding to the above fact and as an evidence of its commitment towards the restructuring of the health sector in its fiscal operation, the Nigeria government has taken up the responsibility of providing good healthcare facilities for its citizens by improving on the amount of its expenditure on health. Available data indicated that on the average about 2.1% to 5.8% of total government expenditure were expended on health within 2000 and 2007 (Mordi, 2010). The belief is that this would improve the health of the citizenry that can translate into healthy human capital base with its multiplier effects on economic growth and development.

Despite this improvement in health spending, the country still lagged behind compared to other countries in the continent. Statistics have shown that the country’s public expenditure on health as a percentage of GDP is 4.1 percent against 4.6 percent African average and over 6.3 percent in developed countries. With these efforts, Nigeria overall health status or sector performance outcomes have not been so encouraging. According to Yaqub (2010), the country overall health performance was ranked 187th among the 191 member states by the World Health Organisation (WHO) in 2000.

Although infant mortality rate fell from 140 in the 1970s to 87.8 and 80.4 per 1000 birth in 2008 and 2011respectively as shown in table (1), the rate is still higher than the regional average (SSA) of 70.2 and 65.8 for the years under consideration and 57.3 in 2010 throughout developing countries. Life expectancy is only 49.8 years compared with 53.5 years for Sub Saharan Africa, 65.4 years for developing countries in 2007, while in 2011, the country only managed to achieved marginal improvement with value of 51.7 (World Bank 2013). An improvement in health status of the citizenry is an important prerequisite for achieving human capital development in every economy with its multiplier effect in skillful, efficient and productive investment in human capital that will translate into economic development.

A glance at the overall Human Development Index of the country portrays a disappointing picture of its quality of human capital. The country ranked 153rd position among 187 countries on the Human Development Index ranking in 2012 with Human Development Index value of 0.47. Although the country experienced an improvement on the Human Development Index ranking compared to its rank of 155th in 2011, still the country cannot make the first ten countries with the highest Human Development Index value in Africa falling behind Kenya Cameroon and Ghana (U N D P 2013). Increase in budgetary allocation spent on the provision of social services is highly advantageous in a developing country like Nigeria, this by itself is not sufficient to guarantee enhancement in service delivery.

Although Infant Mortality Rate (IMR), the probability of dying before age one and Under-five (child) mortality (U5MR), the probability of dying between birth and age five years expressed per 1000 live births which have been a common indicator for children’s wellbeing experienced a decline from 2001 till date, the trend remain unacceptable compared to exploding trend of health sector expenditure. The above scenario tends to call for re-examination of the extant relationship between healthcare expenditure and outcomes in Nigeria. It has however been confirmed that the differences in the level of development among countries of the world is not just due to differences in natural endowment and macroeconomic policies but to some extent depends on institutional environment prevailing in an economy

1.2 Statement of the Problem

In the last decade, Nigerian economy has metamorphosed from the level of million naira to billion naira and postulating to trillion naira on the expenditure side of the budget. This will not be surprising if the economy is experiencing surplus or equilibrium on the records of balance of payment. Better still, if there are infrastructures to improve health within the system or life expectancy so that there will be enough work force. All these are not there, yet we always have a very high estimated expenditure on health. This indicates that something is definitely wrong either with the way government expands budget or with the ways and manners it has always been allocated to each sector of the economy.

Unfortunately, the rising government expenditure on health has not translated to very good rate of life expectancy, as Nigeria ranks among the nation with poor life expectancy rate and high death rate as compared to the fiscal cash been pumped into the health sector. Across the country, there are several cases of poor state of hospitals, some general hospital are well below standard or lack the needed facilities at one point in time to carry out her duty, it dilapidated infrastructure has led to the short life expectancy among Nigerians (WHO, 2005). It is on this note that the main thrust of this study is to evaluate the impact of federal government health funding on economic growth in Nigeria over the years.

1.3 Research Question

In the course of this research the following question will be addressed;

  1. To what extent does federal government health funding impact on the economic growth in Nigeria?
  2. Is there any long-run relationship between federal government health funding and economic growth in Nigeria?

1.4 Objective of the Study

The main objective of the study is to assess the impact of federal government health funding in Nigeria and its role in improving the life expectancy rate, lowering the death rate and generally improving economic growth.

The specific objectives of this study are to:

  1. Empirically investigate federal government health funding and its impact on economic growth in Nigeria.
  2. Evaluate the long-run relationship between federal government health funding and economic growth in Nigeria.

1.5 Research Hypotheses

The hypotheses to be tested in the course of this research work are:

  • H0: That federal government health funding does not have significant impact on economic growth in Nigeria.
  • H0: That federal government health funding does not have significant long-run relationship with economic growth in Nigeria.

1.6 Significance of the Study

This study is significant in the following ways;


Scholars will benefit from this study as it would provide a fore knowledge of happenings in the health sector in Nigeria and also serve as a basis for further research.


Lastly, it would serve as a wakeup call to government so that efficiency and effectiveness will be ensured in the disbursement of funds to the health sector.

1.7 Scope and Limitation of the Study

The economy is a large component with lots of diverse and sometimes complex parts. This study will only focus on the major growth components such as gross domestic product etc. Also the study will cover the entire facet that make up the health sector, but shall empirically investigate the impact of major ones.

This shall be restricted to the period between 1980 and 2015. The major limitation of the study is that the researcher was not financially independent as a student, the need for material trips and logistics needed for this research was not adequately provided and finally, time constraint as there was not enough time to carry this research work as he combines same with academic work.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of government healthcare funding on Nigeria economic.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of government healthcare funding on Nigeria’s economic growth

5.2 Summary

There has been poor allocation to the healthcare system in Nigeria. The challenges of health care services include coverage, affordability, inequality, quality and sustainability of healthcare services. Poverty and household income affect child-mother healthcare and education. Worsening of access to healthcare services and quality of services has negative consequences on Nigeria‟s health status and national productivity. It pays for Nigeria to invest in health. Paying attention to the population health is not merely of political value, but also in the interest of national and global economic development. Health expenditure and health status have impact on national economy, households and individuals. Therefore putting health high on the political agenda and implementing the necessary health policy will uplift national productivity. Increased proportion of national budget should be spent on healthcare.

5.3 Conclusion

The study investigates the impact of federal government healthcare financing on economic growth of Nigeria. As stated in economic theory, the a priori expectation states that government expenditure on health would increase economic growth. The study concluded that there exists significant relationship between the economic growth (GDP), and health expenditure; capital, recurrent and total health expenditures during the period of study. This therefore implies that capital health expenditure, recurrent health expenditure and total health expenditure are a part of significant variables that contributed to economic growth of Nigeria. Similarly, the study concluded that there is a unidirectional relationship between health expenditure and economic growth (proxy by GDP) of Nigeria.

5.4 Recommendations

Based on findings of the study, the following are therefore recommended with a view to enhancing healthcare financing in Nigeria:

Emphasis should be placed on the implementation of the healthcare financing through National Health Insurance Scheme across all tiers of the government especially in the local government areas of the state. This is likely to improve the productivity, overall healthcare delivery.

In order to achieve the goals of the vision 2020, the Nigerian government should further invest in healthcare system with a view to reducing capital flight through medical expenses outside the country which in turn has a negative effect on the economy of Nigeria.

The activities of various health agencies and stakeholders should be well defined to avoid wastage of resources and funds, and the government should seek for more involvement of foreign donors in the health care programmes of the country

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