HEALTH EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA. NEW EVIDENCE
HEALTH EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA. NEW EVIDENCE

Summary/Abstract: The paper employs the ARDL (bounds test) approach to cointegration and error correction analysis to investigate the long run and short run effects of health expenditure on economic growth in Nigeria in the period from 1995 to 2013, while controlling for the effects of domestic investment, net foreign direct investment and exchange rate. The empirical evidence validates the Mushkin’s health-led growth hypothesis as total expenditure on health is observed to have had positive and significant long-run and short-run effects on the real GDP. Further evidence from the analysis is that gross capital formation (proxy for domestic investment) also impacts positively on real GDP in the long- and short-run. The effect of net FDI on real GDP is observed to be negative in the short-run, but statistically not significant in the long run. The short-run effect of currency depreciation on the real GDP is negative and significant, while the long-run effect is positive and significant. The paper recommends, inter alia, increased budgetary allocation to the health sector to enhance its contribution to the growth of Nigeria’s economy.

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