Explaining the incidence of household healthcare expenditure in Nigeria under a regime of low fiscal provision: Is the exchange rate important?

• Published date: 01 February 2022
• Author: N. Bitrus Bature,J. Likita Ogba,I. Bruce Iormom
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2365

ACADEMIC PAPER

Explaining the incidence of household healthcare expenditure

in Nigeria under a regime of low fiscal provision: Is the

exchange rate important?

N. Bitrus Bature

1

| J. Likita Ogba

1

| I. Bruce Iormom

2

1

Department of Economics, University of Jos,

Jos, Nigeria

2

Department of Economics, University of

Mkar, Mkar, Gboko, Nigeria

Correspondence

I. Bruce Iormom, Department of Economics,

University of Mkar, Mkar, Gboko, Nigeria.

Email: tillayor@gmail.com

This study investigates the effect of public health expenditure and the ever-

depreciating exchange rate on household health expenditure while controlling for

gross domestic product per capita and consumer price index. We determined the

stationarity properties of the series using the Lee and Strazicich, Economic Bulletin,

2013, 33, 2483–2492 and the Augmented Dickey Fuller test to confirm that none of

the variables was integrated at an order higher than one. The ARDL bound test for

cointegration and the Johansen procedure both confirmed the existence of long-run

relationship among the series. From the Autoregressive Distributed Lag Model

results, study reveals that public health expenditure has decreasing impact on the

incidence of household health expenditure in both the short- and long-run. House-

hold health expenditure is also found to be exchange rate elastic in the long-run. The

VECM Granger causality result reveals a long-run unidirectional causality running

from public health expenditure, exchange rate, income and domestic prices to house-

hold health expenditure. Our study suggests fiscal expansion for health, exchange

rate appreciation measures and health risk protection for both the formal and

informal sectors.

1|INTRODUCTION

The architecture of the global burden of disease is undergoing a tran-

sition where noncommunicable diseases (NCDs) are angling for a lead-

ing position among general causes of death. According to Kastor and

Mohanty (2018), 40 million deaths occur around the globe due to

NCDs each year (accounting for 70% of all deaths); and this is projec-

ted to be 52 million by 2030. About half of the deaths due to NCDs

occur in low and middle-income countries (LMICs), primarily affecting

the labor force with critical social and economic consequences

(Bollyky, Templin, Cohen & Dieleman, 2017). Unfortunately, the public

sector in these countries offer limited provision for health, thereby

taking lower shares of total health spending while household health

expenditure is not only high, but is also increasing, pushing more

households into poverty.

In Nigeria, the share of household health expenditure has been

high, averaging about 71% from 1995 to 2018, and was the world's

third highest in 2016 (WHO, 2018). Rising from 72.93% in 2000 to

83.15% in 2003 and from 75.05% in 2004 to 77.38% in 2006, it took

a share of 77.05% in 2010 and has never fallen below 71.42% up to

2019 (World Bank, 2018). Evidence from a public expenditure review

of the health sector and National Health Accounts suggest that most

states in Nigeria spend less than 5% of their total expenditure on

healthcare and health spending from all tiers of government amounts

to less than 6% of total government expenditure and less than 25% of

total health spending in the country. The flow of public funds to the

health sector in Nigeria has been inconsistent, declining most of the

time, particularly since the beginning of this millennium. In 2000, pub-

lic health expenditure was estimated at 20.12% as a share of total

health spending but it dropped to 13.24% in 2003 and from 22.54%

in 2008, it came down to 14.40% in 2013 and 13.03% in 2016 (The

World Bank, 2018). There is also the lack of effective risk protection

mechanisms such as fee exemptions and health insurance, further lim-

iting access to quality healthcare services. According to Awosusi,

Received: 25 May 2020 Revised: 11 July 2020 Accepted: 8 August 2020

DOI: 10.1002/pa.2365

J Public Affairs. 2022;22:e2365. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of10

https://doi.org/10.1002/pa.2365