IMPACT OF HEALTH EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (1989-2019)
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The state of health of the population of a country is a major factor driving productivity as only a healthy labor force can make meaningful contributions to the production and growth of national output.
As is the case in a typical production function, the quantity/level of inputs has a corresponding effect on the quantity/level of output depending on the scale of production and returns to scale.
Hence, this make the health of the citizens of a country imperative and as such adequate provision for health should be one of the primary goals of government as it has a positive impact on economic growth, one of the macroeconomic goals of every government.
Similarly, the health of the population is influenced by both the type of health system and of their resources. The relationship between resources and outcomes helps one to effectively assess how functional the health system of a country is.
A country has a health system with a better performance than another country, if, for the same level of resources, it generates better health outcomes, or if it generates the same outcomes but with fewer resources (Elola et al., 1995). Health systems are financed either through taxes, in the case of healthcare services owned by the state (national health services), or through income-related social contributions (social security systems) (Elola et al., 1995).
The contribution of social security to the sustenance of the finance of the health system is phenomenal in countries with high income per capita. It is one of the major duties of every government to provide funds for the provision of social welfare of which health care is an integral part.
Thus, government devotes public fund to the provision of health care services in a bid to improving the health of the citizenry so as to enable them make significant contributions to economic growth and development in the country.
It is believed that an increase in budgetary allocation to social services should enhance service delivery but this is not the case in Nigeria. In many developing countries, budget misappropriation and/or mismanagement is one of the primary causes of ineffective public spending (World Bank, 1998).
For instance, many health indicators show that Nigeria ranks low in health status despite the increasing budgetary allocation to the health sector. UNAIDS, in 2016; ranked Nigeria as the second largest country with the prevalence of HIV/AIDS in the world.
In 2017, Central Intelligence Agency (CIA) also ranked Nigeria as the eighth country with the highest infant mortality rate (69.8 per 1000 live birth) in the world. Furthermore, the United Nations Department of Economic and Social Affairs (UN DESA) says Nigeria’s life expectancy stands at 52.29 years, the 194th in the world.
This statistics is indicative of the fact that the expenditure on health is not enough to develop the health system of Nigeria or appropriate policies are not put in place to improve the health system of the country.
The cost of health is on the high side and in a bid to bridge the huge health funding gap by governments to its citizens, especially in developing and underdeveloped countries, the WHO recommended that countries should allocate at least 13 per cent of their annual budget to the health sector for effective funding. All member countries, including Nigeria signed towards the recommendation.
Also, an Abuja Declaration, signed in 2001 by all member countries of the African Union, including Nigeria, who in fact was the host of the high powered meeting, recommended that for the continent to be at par with other nations of the world in terms of healthcare provision, 15 per cent of their annual budget, at the least, be allocated to the health sector.
However, the budgetary allocation to the health sector (government health expenditure) has been below par over time implying that a large percentage of healthcare services will be funded from out-of-pocket which majority of Nigerians cannot afford.
The Nigerian economy is highly import-dependent not only on goods but also on services to the extent that her political office holders as well as the rich import medical services either by employing the services of foreign medical experts to Nigeria or travelling abroad for medical check-up and/or treatment thereby enriching foreign nations at the expense of the domestic economy.
For instance, the present president of Nigeria, Muhammadu Buhari, went on medical vacation in early 2017 for over 50 days after which he went for another medical vacation for a staggering 103 days in May, 2017.
This attitude by the president, other politicians and the rich alike shows that they do not believe in the services rendered by resident medical practitioners as most of the equipment and machines used in Nigerian are outdated and cannot measure up to what obtains in developed countries of the world.
Consequently, there is an increase in brain-drain as competent medical personnel migrate to developed countries of the world, where sophisticated medical equipment and machines are available, to enhance their productivity and keep up with the pace of development in the medicine.
Consequently, this reduces the labor force in the health sector thereby reducing the sector’s contribution to GDP and the aggregate national output at large.
1.2 STATEMENT OF THE PROBLEM
The health sector policy in Nigeria is under continuous change with change in political administration with aim to improve the health sector in Nigeria so as to enhance medical services and provide healthcare facilities to hospitals in Nigeria.
However despite the effort put together by the federal government of Nigeria there is little or no improvement in the health sector of Nigeria; this could be as a result of poor funding of the health sector, poor budgeting and budgetary policy implementation in Nigeria which may have effect on the economic growth of Nigeria.
Lastly there have been series of studies on health expenditure but none of these studies have been able to elucidate the nature of the relationship or impact of health expenditure on economic growth of Nigeria. It is to this regard that the study is based on the impact of health expenditure on economic growth in Nigeria from 1989-2019.
1.3 AIM AND OBJECTIVES OF THE STUDY
The main aim of the research work is to determine the impact of health expenditure on economic growth in Nigeria. The specific objectives of the study are:
to determine the relationship between health expenditure and economic growth in Nigeria from 1989 to 2019
to determine the source of fund for the Nigeria health sector development from 1989-2019
to examine the health expenditure processes in Nigeria from 1989-2019
to investigate the factors affecting government heath expenditure and economic growth of Nigeria from 1989-2019
to proffer solution to the issue of health expenditure and economic growth in Nigeria
1.4 RESEARCH QUESTIONS
The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:
What is the relationship between health expenditure and economic growth in Nigeria from 1989 to 2019?
What is the source of fund for the Nigeria health sector development from 1989-2019?
What are the health expenditure processes in Nigeria from 1989-2019?
What are the factors affecting government heath expenditure and economic growth of Nigeria from 1989-2019?
What is the solution to the issue of health expenditure and economic growth in Nigeria?
1.5 STATEMENT OF THE HYPOTHESIS
H0: there is no significant relationship between health expenditure and economic growth in Nigeria from 1989 to 2019
H1: there is no significant relationship between health expenditure and economic growth in Nigeria from 1989 to 2019
1.6 SIGNIFICANCE OF THE STUDY
The study on the impact of health expenditure on economic growth in Nigeria will be of immense benefit to the health sector in Nigeria. The study will explore government health expenditure and its impact on the economic growth of Nigeria.
The findings of the study will educate the Nigeria government and policy makers on proper allocation health funds and effective budgeting.
The study will also serve as a repository of information to other researchers that desire to carry out similar research on the above topic. Finally the study will contribute to the body of the existing literature on impact of government health expenditure on economic growth of Nigeria
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1.7 SCOPE OF THE STUDY
The study will cover on the impact of health expenditure on economic growth of Nigeria from 1989-2019
1.8 LIMITATION OF THE STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work
1.9 DEFINITION OF TERMS
Health Expenditure: recurrent and capital spending (central and local levels), external borrowing and grants (including donations from international agencies and NGOs), and social or compulsory insurance funds
Economic growth: Economic growth can be defined as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
IMPACT OF HEALTH EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (1989-2019)
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