Reassessing the Empirical Relationship between Health Expenditure, Governance and Economic Growth in Africa: Analysis of Nigerian Data

Abstract

As an aspect of human capital, a positive association exists amongst health, productivity, and growth in output per capita. On the other hand, social infrastructure defined by the institution of governance has a direct effect on the environment upon which productive activities take place to determine outcomes. Nigeria like most African countries is bedevilled by the high prevalence of inadequate health financing and poor governance. Health financing for Nigeria consistently has fallen short of the AU health funding commitment of 15% of annual budgetary allocation to the health sector. Secondly, poor governance conditions available resources and shape the state of infrastructure, particularly health infrastructure and socioeconomic conditions. In turn, this determines individuals’ level of exposure to health risks and their capacity to actively contribute to productive activity for growth stimulation and sustainability. Against this backdrop, this study added to the existing literature in the context of Nigeria, by theoretically applying the Solow augmented Mankiw-Romer-Weil structural model in the examination of the impact of government size and governance quality in the health sector, on economic growth. Autoregressive Distributed Lag (ARDL) model was adopted in the estimation. Findings show that governance quality adversely affects growth and this reduces the capacity of health spending to stimulate growth by an almost equal margin. As a result, this study recommends legislative backing to the AU health funding commitment in Nigeria.