Effect of Health Capital Expenditure on Economic Growth in Nigeria

Abstract

Huge public funds have been expended on health and other human capital variables over time with little knowledge of the impact on economic growth in Nigeria. Building on the endogenous growth model, this study assessed the impact of health capital expenditure on economic growth in Nigeria. Data was sourced from the Central Bank of Nigeria’s (CBN) statistical bulletin, the National Bureau of Statistics (NBS) and the World Development Indicators (WDI) spanning 1981 to 2018. Based on the results of Augmented Dickey Fuller (ADF) tests, which revealed different orders of integration of the study series, the Autoregressive Distributed Lag model (ARDL) procedure was adopted in estimating the stated model equation. The bounds test suggested the presence of a long-run relationship among the study variables. The short-run model revealed that lagged GDP growth rate (P<0.0), health capital expenditure – CAP (P<0.01), lagged health capital expenditure and gross fixed – CAP(-1) (P<0.05) – capital formation-K (P<0.1), significantly affected economic growth with a significant negative trend and speed of adjustment of 37.6 percent. In the long run, health capital expenditure (P<0.05), gross fixed capital formation (P<0.05), education expenditure (P<0.05) alongside a positive trend significantly affected economic growth. The study concluded that capital expenditure in the health sector as well as education spending and capital formation were important for economic growth. Furthermore, labour was not a limiting factor in the Nigerian growth process, obviously due to abundant availability of labour and a high unemployment rate. Furthermore, the proposition of health-led growth  hypothesis and the endogenous growth models were confirmed. Therefore, more funds should be expended on capital projects in the health and education sectors in order to enhance growth.