Full Project – Impact of health expenditure on economic growth in Nigeria

Full Project – Impact of health expenditure on economic growth in Nigeria

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  • Background to the Study

Health is a key sector of development which is an important end in itself. Health is central to well-being and fundament to the broader notion of expanded human capabilities that lie at the heart of the meaning of development (Abbas, 2001) , Health is a generally believed to contribute to the growth of an economy through providing fitness for the acquisition of training and skills. For over 160 years, Nigeria had implemented health policies, which affects the entire sector (Adawo, 2010). Nigerian government did not only start training people in schools, but formulated education policies in related to primary, secondary and tertiary institutions toward making education workable in Nigeria. It is on record that is the two decades Nigeria had the fastest growing educational industry in the African continent (Chete, 2011).

The foremost macroeconomic objective of governments in virtually all countries is the achievement of rapid and sustainable economic growth with price stability. Consequently, the ultimate aim of macroeconomic policy is to increase the material welfare of the community. The Nigerian economy could be said to have enjoyed some macroeconomic stability in the recent time as its rate of economic growth averaged 2.01 percent within the two decades. However, as a result of high and rapid growth rate of the population, per capita growth rate has remained negative and it averaged -0.852 according to World Development Indicator 2004. With its large reserves of human and natural resources, Nigeria has the potential to build a prosperous economy, reduce poverty significantly, provide health care services, and infrastructure services that its population needed. Nevertheless, despite the country’s relative oil wealth, poverty is widespread (oil revenue is about 0.50c per capita), and Nigeria’s basic social indicators place it among the twenty poorest countries of the world (World Bank, 2014). Poverty is seen in all part of the country. The citizens also lack adequate level of education and cannot satisfy their basic health needs. As such the poor are often illiterate and in poor health condition (Amaghionyeoiwe, 2016).

Developing Nigeria’s human capital is critical, especially now that the country aspired to be among the 20 leading economies in the world by the year. Capital formation is a prerequisite for Nigeria to be among the competitive nations in the 21st century globalized economy, which is skilled and knowledge based. A country’s competitiveness in the New International Economic Order (NIEO) is strongly connected to the quality of her human capital. Hence human capital formation is undoubtedly the pivot for any meaningful programmed of socio-economic development of Nigeria and indeed of any country.

The meaning and scope of human capital have remained on the centre stage for decades. The classical argues that skills gained by humans are some form of capital, while the Neoclassical assert that the human himself is a capital. The proponents of this second view discussed the role of human capital in income distribution and production theory. They argue the differences in levels of health skills gained by persons require that they receive different wages (Goncalves, 2015). The implication of this is a shift from functional distribution income to an individual distribution of income (Zweimuller, 2000)

The idea behind this research work is to evaluate the impact of government expenditure on health on economic growth in Nigeria, and also to examine whether there is a long run relationship between government expenditure on health on the one hand and economic growth on other.


1.2       Statement of the Problem

The impact of government expenditure on economic growth has been investigated extensively in related literature; however, no consensus has been reached yet as regards to the positive and negative impact of government expenditure on economic growth. Uwalt (2002), Ndiyo (2002), Ademu (2003), Yildrim and Sezgin (2002); lin (200) Kneller et.al (2001), leaning (2000), Baro and Sala-i- martin (2000), WHO (2000), Grammy and

Assana (1996), among others, based on their findings posit that government expenditure has a positive and significant impact on economic growth. On the other hand, Abizadeh and Yousefi (2003), Blooms and Sachs (1998), Alexander (2001), Grier and Tullock (2001), Tanninen (2001), Baro (2000) Romer (2000), according to a hypothesis tested found a negative relationship between government expenditure and economic growth. Paragraph conflicting results in the empirical literature have usually been attributed to use of different time periods, sample countries, econometric methods, and functional forms (Ashaur, 2000). There exists no consensus among researchers regarding the impact of government expenditure on economic growth; but there is a possible reason for the disparate findings in the literature. Based on the conflicting empirical evidences, this study aims to provide aims to the problems that have not been addressed in the field of government expenditure and economic growth. The study finds it worthy to revisit the area with possible improvement in the methodology used, variables employed and their measurement and time frame.

1.3       Research Questions

  1. Is there any long run relationship between health expenditure and economic growth?
  2. What is the direction of casual relationship between government health expenditure and economic growth?

1.4       Objectives of the Study

The main objective of the study is to evaluate the impact of government health expenditure on economic growth in Nigeria.

The specific objectives of the study are;

  1. Examine whether a long run relationship exist between government expenditure in health sector and economic growth.
  2. Examine the direction of causal relationship between government expenditure in health sectors and economic growth.

1.5       Research Hypotheses

The study aims to access the impact of government expenditure on in health on the growth rate of the economy. As a result of that, the research proposes two hypotheses that are  used to accomplish the research objectives.

The hypotheses are formulated in the following statements:

Ho1: There is no any significant long run relationship between government expenditure in health and economic growth.

Ho2: There is no casual relationship between the government expenditure in health and economic growth.

1.6       Scope of the Study

The study covers the period of 1990 to 2020 based on data from Nigeria’s public expenditure on health which could be measured in various ways; ratio of health expenditure to gross domestic product; per capita expenditure health; total absolute value of budgetary allocation to health; and proportion of health expenditure devoted to the sector. Although emphasis was on a modified version of the ratio health expenditure to total government expenditure on economic growth was as a result of the data available which was merged together as obtained from the CBN statistical bulletin.

1.7       Significance of the study

The outcome of this study will serve as guide to policy makers in the Ministries of health, Finance, and the National Planning Commission as well as other relevant government department and agencies interested in the development health sector in particular and the economy in general. It will also serve as a useful reference for future researchers in this field as facts and figures are expected to be brought out from the study.

1.8       Organization of the Study

The work will be structured in five chapters. Chapter one focused on introduction of the study, covering issues such as statement of the problem, objectives, hypotheses, scope and limitations of the research, as well as significance of the study. Chapter two dealt with conceptual, empirical and theoretical review of literature, as well as theoretical frame-work. Chapter three present the methodology of the study that was  adopted. While the presentation and analysis of results will be presented in chapter four. Chapter five focused on a summary of the study, conclusion, and its recommendations.


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Full Project – Impact of health expenditure on economic growth in Nigeria