The Impact Of Health Care Financing On Nigerian Economic Growth

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This Research Work is on The Impact Of Health Care Financing On Nigerian Economic Growth

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Nigeria’s most important macroeconomic objective remains how to achieve accelerated economic growth and reduce poverty. In order to achieve this laudable objective, certain variables which have the capacity to accelerate growth have to be identified. Of all the contributory variables or factors to economic growth and increased productivity, human capital stands out as a major catalyst. To this end, effective investment in human capital is a key component of long run economic growth and improved productivity (Olayemi 2012). Expenditures on education and health are regarded as investment in human capital because it helps in skill formation and thus raises the ability to work and produce more (Jhingan 2009).

Education has positive impacts on the economy and so, investment in education and training is imperative if the aim is to propel the economy to higher level of productivity and income and thereby accelerate the rate of economic growth. Education increases the number of knowledgeable workers by improving their skills and enabling them to new challenges. In addition, education enhances their occupational mobility, reduces the level of unemployment in the economy, increases the earning capacity and productivity of the country’s work force, improves access to health information which will increase life expectancy and, at the same time lower the fertility rate. Therefore, education is capable of enhancing the efficient production of goods and services by ensuring thorough screening that the best people are selected and made available for the world of research (Olayemi, 2012). Anyanwu and Erhijakpor (2007a), used panel data of African countries from 1990 to 2002, examined the effect of public expenditure on educational enrolment with illustration from Nigeria and other SANE (South Africa, Algeria, Nigeria, and Egypt) countries at the primary and secondary school levels. The results show that government expenditure on education has a positive and significant direct impact on primary and secondary education enrolment rates.

Despite the tremendous progress in expanding enrolment and increasing years of schooling since 1960, Nigeria is yet to benefit from such development in-term of increased growth. Schooling in Nigeria has not delivered fully on its promise as the driver of economic success. Expanding school attainment, at the centre of most development strategies, has not guaranteed better economic conditions (Fadiya, 2010). Scholars attributed the failure of the Nigeria’s educational system to promote economic growth to the poor state of the system (Uwatt, 2002, Chete and Adeoye, 2002; Babatunde and Adefabi 2005). According to Babatunde and Adefabi (2005), the education that most Nigerians receive is not very good. Children attend primary schools which last for six years, but the education they receive there is not sufficient. The pupils to teachers ratio there was 37 to 1 and the youth literacy rate was 13% for males and 20% for females up to the late 1990s. In 2002, 33% of the relevant age group attended secondary school and only 4% attended tertiary schools. The low number of students in tertiary school can be easily explained in that spending per student in tertiary schools is 529.8% of the GNP. Furthermore, public spending on education was only 0.9% of the GNP in 2002 (World Bank, 2004).

Health comes next to education in the development of human resources. According to Yesufu (2000), a good health policy is a means by which government can at once ensure that manpower is generated in the right mix distributed in accordance with national priorities and ensure the highest level of labour productivity. Health improvement influences morbidity and labour force productivity. Thereby enhancing the process and speeding of economic development. Most developing countries have given serious attention to the provision of public health, education and social welfare services. This is because; it is believed that such measures could improve the quality of life of their people and their efficiency as productive agents thereby accelerating the general socio-economic development of their nation. Since health and education status affects the individual participation in economic activities and consequently the level of labour force in an economy, a re-examination of the level of investment in human capital and sustainable growth is highly imperative.

Given the size of social spending in the budgets of many developing countries and the desire to enhance the quality of fiscal adjustment while pursuing macroeconomic stability, policy makers are striving to increase the effectiveness of expenditure policy, particularly social spending, and of the expenditure management system, including the ability to track all pro poor spending. These aspects of fiscal policies are important features of programs supported by the Poverty Reduction and Growth Facility (PRGF) and are regarded by many low-income countries as important policy challenges in their Poverty Reduction Strategy Papers (PRSPs). As many low-income countries attempt to make their budgets pro poor by, among other things, increasing the share of social spending, they also strive to ensure that the poor receive an appropriate share of the increased allocation. Because the poor often have limited access to services that could enable them to escape from poverty, the government is expected to target the provision of these services to the poor (Davoodiet al, 2003). From the above, it has become evidenced that public expenditure is a major contributor to human capital development especially expenditure on education and health sectors. The investment on health and education sectors according to literature should therefore improve the productivity of an economy.

1.2 Statement of the Problem

The financing of human capital investment in Nigeria has often been described as inadequate with budgetary allocations to these sectors (especially health and education) hardly exceeding, on average 4% of the nation’s total budgetary provisions (Orubuloye and Oni, 1996; Riman and Apkan, 2012). For instance, the education and health care spending in Nigeria is segmented into private and public spending. While public health expenditures in Nigeria account for just 20-30% of total health expenditures, private expenditures on health account for 70-80% of total health expenditure. The dominant private health expenditure is out-of-pocket expenses, and this accounts for more than 90% of private health expenditures. Out-of-pocket expenditure as a proportion of total health expenditure averaged 64.59% from 1998 to 2002. In 2003, it accounted for 74% of total health expenditure (THE). It decreased to 66% in 2004 and later increased to 68% in 2005 (Soyibo, Olaniyan and Lawanson, 2009; Soyibo, 2005). This implies that households bear the highest burden of health expenditure in Nigeria. The $5 per capita expenditure on health in Nigeria is far below the $14 recommended by World Bank for Africa and much lower than the $34 per capita recommended by WHO Macroeconomic Commission for Health for low income countries to provide basic health care services. One can infer that out-of- pocket expenditure is the major source of funding for childhood illnesses. The expenditure appears grossly inadequate as the annual per capita out-of- pocket expenditure per under-five child was $1.8 (Samboet al, 2004). The comparatively low patronage of public health facilities may be a reflection of the level of poverty in Nigeria. This puts a serious doubt on the government ability to improve accessibility, reliability and affordability of health services in the country.

It is expected that budgetary allocations to health sector would improve health outcome and reduce all kinds of mortality rate. Ichoku, and Fonta, (2006) observed that increased budgetary allocation to health has assisted some heavily-indebted poor countries to fight poverty, and raise the living standard of people in these countries. Remarkably, the federal budgetary component of health expenditure has increased over the years. It increased from 1.7% in 1991 to 7.2% in 2007(WHO, 2009; NHS, 2011). Nevertheless, the budgetary allocation for health is still below the15% signed by the Nigerian government in the Abuja declaration (WHO, 2009). Given this level of government spending, it will be very difficult to provide the essential health care services, and with the unpredictable change of the oil prices in the world market and low tax base, health care will always be at the peril of underfunding by the Nigerian government. Low level of life expectancy is explained by inadequate finances meant for health sector in Nigeria. This is blamed on uneven distribution of finance and facilities, especially in the primary health care. On the other hand, despite the budgetary provision for health, many of the health institutions still lack adequate personnel and facilities to provide quality care for the citizenry. There is gross inadequacy in the number of these facilities, and the few available are unevenly distributed.

The allocation to education sector is not different from that of health. It is pertinent to note also that the budgetary allocation to the education sector reduced to 8.7 and 7 per cent in 2000 and 2001 respectively and 8.5 in 2002 (Akpan, 2009). Education expenditure as a ratio of total government expenditure between 1975 and 2007 averages 6.97% and varies from 2.22% to 14.30%. This fell below the minimum standard of 26% of annual budget prescribed by the United Nations Scientific and Cultural Organization. The emerging trend shows that education expenditure as a ratio of GDP follows the same trend. It ranges from 0.39% to 7.86% with a mean of 1.62% (Dauda, 2011). It is shown from the analysis that the Nigerian government needs to commit more funds to education sector if the country wants to develop skilled manpower that would make enormous contribution to growth and development. The benefit of improved funding on education and health cannot be overemphasized.

However, there is strong evidence that public spending affects school enrolment positively. Unfavourable initial conditions, such as high illiteracy rates reduce the effectiveness of social spending. Furthermore, there is a significant non-linear negative relationship between public spending and mortality rates, with the elasticity of spending being higher for a sub-sample of low-income countries (Baldacci et al, 2003). In addition, the effect of initial enrolment rates becomes stronger and income elasticities tend to be lower in poorer countries. Factors such as-corruption and fiscal decentralization- could have a direct impact on the link between public social spending and outcomes. Empirically, governance is important in ascertaining the efficacy of public spending. In particular, a 1 percent point increase in the share of public health spending in GDP lowers the under-5 mortality rate by 0.32% in countries with good governance (as measured by a corruption index),0.20% in countries with average governance, and has no impact in countries with weak governance. Similarly, a 1% point increase in the share of public education spending in GDP lowers the primary education failure by 0.70% in countries with good governance, and has no discernible impact in countries with weaker governance (Rajkumar and Swaroop, 2008). These findings provide one possible explanation that public spending often does not yield the expected improvement in human capital development. The reality is that public spending, governance and development outcomes are interlinked. This study intends to assess empirically the impact of public expenditure on health and economic outcomes. We shall specifically address the following research questions:

  1. To what extent has government spending on health impacted on health outcome?
  2. To what extent has government spending on education impacted on economic outcome?

1.3 Research Objectives

  1. To ascertain to what extent public expenditure on health has impacted on health outcome.
  2. To ascertain to what extent public expenditure on education has impacted on economic outcome.

1.4 Research Hypotheses

The hypotheses are stated based on the Null, while the alternative is inferred. They are:

H01: There is no significant impact of Public health expenditure on health outcome.

H02: Public education expenditure does not have significant impact on economic outcome.

1.5 Significance of the Study

The purpose of this study is to make available some current information and analysis of the impact of public sector spending on health and economic outcomes in Nigeria will be helpful to those who will be making, interpreting, and implementing educational/health policies in the near future, at a time when the momentum for expansion and reform of the systems are growing.

It will also assist the government in re-organising its resources to health and education sectors because of their high propensity to human capital growth. Finally, it will add to existing literature, thus providing relevant information that could guide further research on the topic.

1.6 Scope of the Study

This study will cover the period 1980 to 2010. The choice of this period is to ensure the largest possible number of observations to make it possible to conduct a statistically meaningful econometric analysis. The study would concentrate on the public sector spending on health and education as it affects their outcomes in Nigeria.

1.7 Limitations of the study

All research works generally record a number of limitations in the course of the research and this was not an exception. The study faced the problem of data; like many studies on African countries in general and Nigeria in particular, the study was constrained to the available data in the National data banks. Also, the want for more income and lack of scholarships hindered the smooth progress of the study; however it apparently did not prevent the completion of the project.

1.8 Organization of the study

This study is organized into five chapters; the first chapter detailed the background of the study showing the related works, policies and the existing debate. Then the statement of the problem that showed the research and economic problem of the study that translates into the research questions and problems of the study. The second chapter details the existing theoretical and empirical literature on the subject matter. While, chapter three showed the analytical framework and model specification of the model used and the presentation of results and evaluation of hypotheses are discussed in chapter four. The last chapter captioned as chapter five, summarizes the work, concludes and proffers recommendations from the findings and then proposes areas for further research.

Title Page

Certification/Declaration

Approval Page

Dedication

Acknowledgement

Abstract

Table of content

 

Chapter 1

Introduction

1:1 Introduction

1:2 Background of the Study

1:3 Statements of Problems

1:4 Objectives of the Study

1:5 Research Question

1:6 Study of the Hypothesis

1:7 Significance of the Study

1:8 Justification of the Study

1:9 Scope of the Study

1:10 Definition of Terms

Chapter 2

Literature Review

2:0 Introduction

2:1 Conceptual Clarification

2:2 Theoretical Framework

2:3 Literatures on the Subject Matter

Chapter 3

Research Methodology

3:0 Area of Study

3:1 Source of Data

3:2 Sampling Techniques

3:3 Method Data Collection

3:4 Method of Data Analysis

3:5 Reliability of Instrument

3:6 Validity of Instrument

3:7 Limitations of the Study

Chapter 4

Data Analysis

4:0 Introduction

4:1 Finding of the Study

4:2 Discussion of the Study

4:3 Summary

Chapter 5

Summary, Conclusion and Recommendation

5:0 Summary of Findings

5:1 Conclusion

5:2 Recommendations

5:3 Proposal for Further Studies

 

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