Analysis of the Impact of Health Expenditures on Per Capita Income in Nigeria

By: Aigbedion I. Marvelous, Emily Joshua-Gyang, Adah Noah Ataboh

Pages: 187–205, Volume: 2, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 9/1/2025, 2025

ISSN (Electronic): 2536-6742

DOI: 10.48028/iiprds/aefunaijefds.v2.i2.10

Analysis of the Impact of Health Expenditures on Per Capita Income in Nigeria

Abstract:

Per capita income serves as a fundamental indicator of economic development and living standards. However, available data from 1990 to 2024 reveals that Nigeria’s per capita income remains disproportionately low compared to other developing nations with similar economic profiles, including South Africa and Brazil. This persistent underperformance suggests potential inefficiencies in the country’s health expenditure allocation and management. Therefore, this study investigates the impact of health expenditures – specifically out-of-pocket (OPX), recurrent (HRX), and capital (HCX) health spending – on per capita income in Nigeria from 1990 to 2024, employing Dynamic Ordinary Least Squares (DOLS) regression analysis of time series data. The empirical results demonstrate that out-of-pocket health expenditures exert a significant positive inEuence on per capita income, highlighting their role in maintaining economic productivity through healthcare access. In contrast, both recurrent and capital health expenditures show statistically insignificant effects, indicating potential inefficiencies in public health spending implementation. These findings suggest that while private health spending contributes to immediate economic activity, Nigeria’s public health investments fail to yield proportional returns in terms of income growth. Based on these findings, the study recommends strategic reforms to optimize health expenditure allocation. Specifically, the Federal Ministry of Health should: implement policies to reduce reliance on out-of-pocket spending while preserving its economic benefits through expanded insurance coverage; introduce performance-based budgeting for recurrent health expenditures to improve efficiency; and establish dedicated funding mechanisms for health infrastructure projects to enhance the impact of capital expenditures. These measures, implemented in coordination with the Central Bank of Nigeria and state governments, could transform health spending into a more effective driver of per capita income growth, ultimately improving both economic performance and population health outcomes in Nigeria.

Keywords: Health expenditure, Per capita income, Human capital, Economic development, Nigeria