An Econometric Analysis of the Determinants of Government Health Expenditures in Nigeria

An Econometric Analysis of the Determinants of Government Health Expenditures in Nigeria

Author(s) by M. M. Fasoranti
Pages 193-206
Keywords Health expenditures, Causality, Determinants.
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Abstract


A healthy population is an indispensable factor in the growth and sustainable development of a nation. Therefore, to achieve sustainable development, every national government cannot but devote sizeable funds to finance health services. To provide a platform for evaluating and controlling government expenditures, it is necessary to know those factors that affect government spending on health. This study therefore examined the determinants of government health expenditures in Nigeria between 1970 and 2012. Focus was on the analysis of government expenditures within the period of study, the determinants of and the direction of causality between government health expenditures and the specified independent variables. Data was sourced from various issues of Central Bank of Nigeria’s publications, National Bureau of Statistics and world bank publications. Data collected was analyzed with the aid of descriptive statistics and the Ordinary Least Square multiple regression. Other tests employed were the Augumented Dickey-Fuller (ADF) unit root test, Johansen co-integration test and the pairwise Granger Causality test. The study found that all variables were stationary at level and that long run relationship existed between government health expenditures and the determinants. Furthermore, all the variables were positively related to government health expenditures except total population of age 14 years and younger. The study found that literacy rate, share of health expenditures in total government expenditures and consumer price index were significant factors in government health expenditures within the study period. On the other hand, per capita GDP, total population of age 65 and above, total population of age 14 and younger and life expectancy rate were found to be insignificant. The causality test showed the existence of uni-directional and bi-directional causality for some variables while for some others, there was no causality. The income elasticity was found to be inelastic showing that health is a necessity. This study recommended higher budgetary allocation to health services and that higher premium be placed on the health needs of the population aged 14 years and younger. Moreover, such funds must be properly managed so as to reach the target population.

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