Conventional wisdom holds that health is central to human general well-being, as well as a prerequisite for increased productivity, and overall economic growth and development of an economy. This explains why governments across the globe are making enormous efforts to achieve good health for all and Nigeria is no exception. Regrettably, despite government’s efforts to improve the health situation of the citizens through massive health care expenditure, the Nigerian health outcomes (such as life expectancy and mortality rate) are still considered one of the poorest and most miserable in the world. Thus, the study follows a causality approach to examining the relationship among government health expenditure, health outcomes, and economic growth in Nigeria during the period 1986 – 2016.
1.1 Background of the study
The reform of health delivery system is one of the essential elements of overall development of a country. Most common policy response to the demand for improved healthcare is to increase the public health expenditure. However, taking into account the complexity of the determinants of health outcomes, it can be naïve to presume a direct positive relation between public health expenditure and health outcome. The Governments in developed countries with better health indicators have large growing public health expenditures; nevertheless the role of public expenditure in health care provision has been constantly debated. Conventional wisdom holds that health is central to human general well-being, as well as a prerequisite for increased productivity, and overall economic growth and development of an economy. Health is also a driving force upon which other human capitals such as education, skills, etc, rely on. Oni (2014) posits that healthy workers lose less time from work and are more productive when working. According to (WHO, 2005), good health has the consequence of widespread economic growth, and an escape of ill – health traps in poverty. As pointed out by Barro (1996), health is a capital productive asset and an engine of growth. Therefore, it is rather instructive to appreciate how dramatic the improvements in World’s Health have been over the past decades. In 1950, some 280 out of every 1000 children in developing countries died before their fifth birthday. By the year 2000, the number had reduced to 126 per 1000 in low-income countries, 39 per 1000 in middle-income countries, and 6 per 1000 in high-income countries (Todaro and Smith, 2006). This is the result of total eradication of some important killer diseases such as small pox as well as some major childhood illnesses such as rubella and polio, through the use of vaccines. Following the reports of the World Health Organization (2005), about fifty percent of economic growth differentials between developed and developing nations are attributed to ill-health, and low life expectancy. This is because developed countries spend higher proportion of their Gross Domestic Products (GDP) in providing health care services to their citizens, while some of the developing countries exhibit great variability in health care expenditure. The reports also show that there exists very great variability in the performance of health system at each income level, and in each country. According to the same report, both developed and developing countries were ranked according to the proportion of income spent on health care. While Singapore was ranked 6th, Costa Rica was 36th with Colombia, Chile, and Morocco as 22nd, 23rd and 29th respectively. However, it should be noted that all of these developing countries ranked higher than the United States. This is an indication that much can be done with relatively modest income. The Nigerian economy has been backward for the past two decades despite its independent status since 1960. The petroleum rich Nigeria economy long hobbled by political instability, corruption and poor macroeconomic management, is undergoing substantial economic reform under the new civilian administration. Nigeria’s economy is struggling to leverage the country’s vast wealth in fossil fuels in order to displace the crushing poverty that affects about 57 percent of its population. Economists refer to the coexistence of vast natural resources wealth and extreme personal poverty in developing countries like Nigeria as the “paradox of plenty” or the “curse of oil” Nigeria’s exports of oil and natural gas – at a time of peak prices – have enabled the country to post merchandise trade and current account surpluses in recent years. Reportedly, 80 percent of Nigeria’s energy revenue flows to the government, 16 percent covers operational costs, and the remaining 4 percent go to investors (Odusola, 1998). Health is a very important aspect of an individual’s wellbeing, and since individuals make a nation, therefore, healthcare could be regarded as one of the necessary conditions to achieving a sustainable longterm economic development. Health can be defined to mean general physical condition i.e. condition of the body or mind especially in terms of the presence or absence of illness, injuries or impairments. The issue of health is a very sensitive one because it deals with not just humans but with human body. Without a good health condition it is almost impossible to carry out any economic activity and if at all there is any it will certainly not be efficient and so we really have to take this subject seriously (Cremieux, et al., 1999). It has been established in the literature that improvement in health care is an important prerequisite for enhancing Human Capital Development (HCD) in any and every economy. According to Siddiqui, Afridi and Haq (1995), they opined that improved health status of a nation creates outward shift in labour supply curve/increase productivity of labour with a resultant increase in productivity of investment in other forms of human capital. Thus, the level of government expenditure on health determines the ultimate level of human capital development which eventually leads to better, more skilful, efficient and productive investment in other sector of the economy (Muhammad and Khan, 2007). The financial commitments of government to the health sector are both the recurrent and capital expenditure on health.