Econometric Analysis of Healthcare Expenditure Determinants in Nigerian States: A Panel Cointegration Approach

Public healthcare expenditure in Nigerian states remains persistently below the Abuja Declaration benchmark of 15 percent of total government budget, with wide disparities across states that correlate with revenue base differences, political economy factors, and institutional capacity. This study applies panel cointegration methods, including the Pedroni and Westerlund cointegration tests, the fully modified OLS estimator, and the panel dynamic OLS estimator, to examine the long-run determinants of per capita state government health expenditure across 36 states and FCT from 2010 to 2023. Independent variables include internally generated revenue per capita, federal allocation share, state GDP per capita, disease burden index, urbanisation rate, and political competition score from electoral margin data. The panel unit root tests of Im-Pesaran-Shin confirm non-stationarity of all variables, and Pedroni tests confirm at least one cointegrating relationship in the panel. FMOLS estimates indicate that internally generated revenue per capita has a long-run elasticity of 0.61 with respect to health expenditure, larger than the 0.38 elasticity of federal transfers, suggesting that fiscal autonomy enhancement would increase health spending more effectively than transfer augmentation. Disease burden index exhibits a significant positive effect, confirming need-responsive allocation behaviour at the state level. Keywords: healthcare expenditure, panel cointegration, FMOLS, Nigerian states, fiscal federalism.