Analysis of Health Expenditure and Its Effect on Economic Productivity in Nigeria

Public and private health expenditure determines health outcomes that in turn affect labour productivity and economic output, and analysing this relationship in Nigeria provides evidence for health financing policy. This study analysed the relationship between health expenditure and labour productivity in Nigeria using annual time series data from 2000 to 2022. Data on total health expenditure per capita and various productivity measures were obtained from the World Bank, WHO, and CBN databases. An ARDL bounds test was applied to examine long-run and short-run relationships. Results showed that per capita health expenditure in Nigeria averaged USD 74 annually, among the lowest in sub-Saharan Africa. Cointegration was confirmed between health expenditure and labour productivity. A one percent increase in per capita health expenditure was associated with a 0.53 percent increase in labour productivity in the long run. Out-of-pocket health expenditure (63 percent of total health financing) was associated with catastrophic financial shocks that reduced household productive capacity. Government health expenditure growth showed a stronger productivity effect than private spending. The study concludes that inadequate health financing is a significant constraint on Nigeria's economic productivity. Recommendations include increasing the federal health budget to 15 percent of total expenditure as stipulated by the Abuja Declaration, expanding NHIS coverage for the informal sector, and reducing the out-of-pocket burden through social health insurance.

Keywords: health expenditure, labour productivity, Nigeria, ARDL model, health economics