Global Health Security: An Evaluation of Public Health Expenditure, Health Status and Economic Development in Nigeria

*Ngozi Chioma Ewurum and Samuel Oseloka Okafor*

## **Abstract**

This chapter examines the intersection of public health expenditure, health status, and economic development in Nigeria and their implications for global health security. Drawing on a comprehensive dataset spanning the period, 1981-2021, the study utilizes a simultaneous equation model, employing three-stage least squares for data estimation. We developed an innovative composite economic development index (EDI) that integrates the Seers' Three-Pillars Model of Development encompassing poverty, inequality, and unemployment using principal component analysis (PCA). Additionally, the study crafted a health status index, utilizing indicators such as infant, under-five, maternal mortality rates, and crude death rate. Utilizing PCA allows for a comprehensive evaluation of economic development that encompasses both socio-economic and health dimensions. Other control variables used were adopted from the six WHO health system building blocks. Findings reveal bidirectional causal relationships between public health expenditure and health status, with a unidirectional causal relationship observed from health status to economic development. There is no direct causal link between public health expenditure and economic development, indicating an indirect impact through health status. This inferred that the impact of public health expenditure on economic development works through the health status channel. Policy recommendations include increasing budget allocations to health sector, subsidizing health services, and addressing poverty, inequality, and unemployment issues by improving health infrastructure, income levels, enhancing equitable healthcare accessibility and affordability, bolstering human resources for health in the healthcare sector and reliable power generation. These interventions are essential for fostering sustainable and inclusive economic development in Nigeria, enhancing the country's resilience to health crises, reducing vulnerability to mortality rates and diseases, thereby contributing to global health security efforts.

**Keywords:** public health expenditure, health status, composite economic development index, global health security, three-pillar model of development, simultaneous equation, three-stage least square (3SLS)

### **1. Introduction**

Economic development has become pervasive that the pursuit of economic progress and its impact have permeated multiple dimensions of society. The persistent global concern and attention towards sustainable economic development have spurred various efforts by countries especially developing nations, to prioritize health policies, programs and agendas alongside their economic growth strategies. Globally, healthcare especially child health is identified as a core factor for long-run economic development [1]. Thus, Investing in health initiatives such as the sustainable development Goals (SDGs) adopted by UN member states in 2015, aiming to address various global challenges, including poverty, hunger, and inequality within and among countries is vital for ensuring healthy lives and promoting overall well-being for all citizens at all ages, as they are essential components for a sustainable economic development. In the context of global health security, economic development is closely tied to a nation's ability to invest in and maintain a strong healthcare system. However, economic development often leads to improved infrastructure, including healthcare facilities, which can enhance a country's ability to respond to emergencies and outbreaks. Conversely, weak health systems in any country, including Nigeria, can pose a threat to global health security. Diseases can easily cross borders, and insufficient healthcare infrastructure may hinder a country's ability to respond effectively to outbreaks.

Strong, resilient, and inclusive health systems are crucial foundations for addressing the most pressing health challenges worldwide [2]. It includes achieving the Sustainable Development Goal (SDG) target of Universal Health Coverage (UHC) as well as ensuring national, regional, and global health security (https://sustainablede velopment.un.org/SDG3) [3]. They are essential for improving health outcomes, promoting social and economic development, and building healthier, more resilient societies [2, 4].

Global health security has become a critical concern in the twenty-first century, with infectious diseases, pandemics, and other health challenges and emergencies posing significant threats to populations worldwide. In this context, understanding the dynamics of public health expenditure, health status indicators, and economic development in individual countries is essential for effective preparedness and response to health crises. Nigeria, as the most populous country in Africa, faces unique challenges in ensuring health security for its citizens and contributing to global health stability. Health constitutes a fundamental human right, and ensuring effective global public health security hinges upon a collective responsibility [5]. The collective responsibility for global health involves cooperation among nations to address various challenges like infectious diseases, maternal and child mortality rates, pandemics, and healthcare access. It requires sharing resources, knowledge, and technology to build resilient healthcare systems and respond effectively to health emergencies. By prioritizing investment in healthcare, Nigeria can contribute to addressing global health challenges while also advancing its own inclusive economic development agenda [6, 7].

Health is a fundamental determinant of an individual's overall quality of life, with broader implications for global well-being and safety. The interconnectedness of national health dynamics carries profound ramifications for global health and safety. The imperative lies in fostering international collaboration, fortifying robust health systems, and ensuring effective governance. This imperative trifecta forms the linchpin for adeptly managing the intricate interplay of global health implications; thereby

#### *Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

advancing a collective framework for sustained well-being on a global scale. However, the correlation between health and economic development is consistent with the worldwide endeavors aimed at attaining the sustainable development Goals (SDGs), with a specific focus on Goal 3 (Good Health and Well-being for all at all ages) and Goal 8 (Decent Work and Economic Growth). Achieving these goals by 2030 involves reducing global maternal mortality ratio to less than 70 per 1000 live births, preventing newborns and child deaths to at least as low as 12 per 1000 live births and 25 per 1000 live births respectively, and in turn fostering sustainable development (United Nations-sustainable Development Goals; https://sustainabledevelopment .un. org/SDGs3). However, increase investment in health systems is needed to support countries in their recovery and build resilience against future health threats. Therefore, advancement in healthcare not only enhances individual well-being but plays a pivotal role in fostering the sustainable success of broader development initiatives.

In the dynamic landscape of global health security, nations stand at the crossroad of public health resilience, the well-being of their populations, and economic development. Public health resilience refers to a nation's capacity and ability to effectively manage, prepare for, respond to, and recover from health crises. However, the overall welfare of the citizens underscores the comprehensive nature of well-being, including physical and mental health, access to education, and a satisfactory quality of life. Nations must consider the holistic welfare of their populations as an integral component of their broader health security and development agendas. Global health security involves collaboration among nations to ensure the health and well-being of people worldwide. However, a well-functioning and resilient health system is fundamental to achieving a regional, national and global health security. Sustained progress on global health security cannot be made without functioning and resilient health system capable of protecting all people, including the poorest and most marginalized from health threats [8].

An essential element of economic development of a country is its people state of health. Economic development can be understood as a multifaceted process that involves sustained economic growth, expanding human freedoms, and creating an environment that supports people's well-being [9]. As articulated by Sachs [10], economic development delineates the trajectory through which nations transcend poverty and attain higher levels of economic and social well-being which encompasses improvement in quality of life, income per capita, employment opportunities, access to healthcare, education, social services and a general enhancement of societal conditions. Thus, economic development is referred to as a process of sustained increased in the real per capita income of a country, accompanied by structural transformation and diversification of the economy, improvement in living standards and reduction in poverty and inequality [11–13].

Health in the Post-2015 Agenda [14], a report of the Global Thematic Consultation on Health, recognizes health as a critical contributor to, and outcome of, sustainable development and human well-being. Health status refers to the overall health and well-being of individuals within a population. Thus, Makuta and O'Hare [15] sees improved health status as not only a goal but a prerequisite for the development process, since good health and wellbeing is a life asset globally and an important form of human capital. Therefore, to make the biggest impact on development, then, the government must empower and invest in citizens by increasing health expenditure and devoting substantial funds to its health sector to support its healthcare need [16].

Public health expenditure involves funding for various health-related activities such as healthcare services, preventive measures, healthcare infrastructures,

personnel, medicines, and research. Adequate funding for healthcare is crucial for the development of a robust health system, capable of handling a higher volume of patients during emergencies and providing effective preventive measures. It involves having a robust healthcare system, emergency response mechanism, and the ability to manage and control the spread of diseases. Unfortunately, in developing countries like Nigeria, the percentage allocation for health is habitually minuscule, resulting in poor health outcomes [17]. Okafor [18] confirms that Nigeria health situation is of growing concern especially in the area of children, women/mothers and most vulnerable in the society while Amiri and Gerdtham [19] argue that significant investments are needed to improve women and children's health, arguing that they are fundamental to development. However, despite the investments and some improvements made so far on health sector, Nigeria's health indices remain weak and this is a significant challenge stating that Nigeria's average life expectancy was 54.3% in 2018 and the infant mortality rate stood at 74.2 per 1000 live births in 2019 [20–22]. Weak health systems in any country, including Nigeria, can pose a threat to global health security. Disease can easily cross borders, and insufficient healthcare infrastructure may hinder a country's ability to respond effectively to outbreaks.

In Nigeria, challenges such as corruption, mismanagement, and insufficient allocation of funds have historically affected the healthcare sector. Insufficient funding can lead to a lack of essential resources and services, impacting the overall health of the population and global health security at alrge. Consequently, the health infrastructure in Nigeria faces various challenges, including inadequate facilities, a shortage of healthcare professionals, and uneven distribution of resources. Strengthening and expanding healthcare infrastructure are essential for improving overall health security. Indeed, the World Bank noted that the Nigeria's government expenditure on health is the lowest in the world. The budgetary allocation to health in 2018 by the Federal Government was only 4.5%, compared to 7.1% for education and 7.8% for power, works and housing. In 2019, the budgetary allocation to health was 4.7%; in 2020 and 2021, it was 4.14% and 4.18% respectively. This marginal increase to 4.18% in 2021 budget was as a result of the sudden outbreak of COVID-19 pandemic. Therefore, it is not surprising that health outcomes in the country are among the poorest in the world [23, 24].

Despite these challenges, health remains a critical tool for promoting a sustainable economic development in a rapidly changing world by advocating for an investment in health sector through allocation of a sizeable fund to health sector which will reduce mortality rates and in turn lead to poverty, inequality and unemployment reduction in other to attain economic development. Conversely, Dudley Seers theory of development has made significant contributions to the discourse on development by highlighting the importance of considering social dimensions alongside economic growth.

The objective of this chapter is to examine the relationship among public health expenditure, health status, and economic development in Nigeria and its broader implication for global health security. It seeks to advance conceptual instruments based on Dudley Seers' developmental approach. It advocates for a multidimensional perspective that includes poverty, inequality, unemployment, and other socioeconomic factors. This necessitates the creation of measurement indices capturing these dimensions for a more holistic understanding of development outcomes. Building upon Seers' concepts on development known as Seers' Three-Pillar Model of development which is a combination of poverty, inequality, and unemployment as key dimension, this chapter introduces and developed a new composite index, the

*Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

composite economic development index (EDI), tailored to assess the specific development level in Nigeria. This economic development index aims to provide a more comprehensive and context-specific evaluation of economic development in the country. The composite economic development index (EDI) is considered a novel concept of measuring economic development because it extends beyond the traditional scope of conventional economic indices.

Following the introduction, we structured this chapter as thus; Section 2 briefly reviewed some related literatures by providing some conceptual issues necessary to understand more fundamental critiques of development and theoretical underpinning, together with the empirical literature. Section 3 provides the research methods while Section 4 presents and discusses the results. Section 5 provides the conclusion and policy recommendation.

### **2. Review of related literature and theoretical underpinning**

#### **2.1 Conceptual issues**

#### *2.1.1 Economic development*

Economic development is a multifaceted concept with diverse perspectives, lacking a widely embraced definition. Over time, scholars have offered diverse definitions, with perspectives evolving from a narrow focus on GDP growth in the 1950s and 1960s to broader views considering social, political, and environmental factors. Scholars like Sen [25] emphasize the inadequacy of income measures alone, proposing a capability approach that emphasized expanding people's freedom and well-being. He sees the ability to access education, healthcare, and unemployment insurance as central elements that expand people's capabilities [26]. According to Sen [27], furthermore, "the main purpose of development is to spread freedom and its 'thousand charms' to the unfree citizens" implying that freedom is not only valuable in itself but also leads to a multitude of other positive outcomes, such as economic prosperity, social harmony, and personal fulfilment. Todaro and Smith [28, 29] viewed development as enhancing human lives and capabilities by raising people's level of living, selfesteem, and freedom while Sachs [10] ties economic development to the goal of eradicating poverty and promoting sustainability. This reflects a global perspective that considers not only individual well-being but also broader issues of equity and environmental sustainability.

Consequently, the emphasis on multi-dimensional approaches has led to the development of alternative frameworks for measuring economic development known as the Human Development Index (HDI) constructed with inputs from Amartya Sen by the United Nation Development Program (UNDP) [30]. This incorporates a single composite index measures of three equally weighted indicators: longevity (a proxy for health measured by life expectancy at birth and Nutrition); Education- (composite of the adult literacy rate and the combined gross enrolment ratio for primary, secondary, and post-secondary schools); and standard of living measured by GNI per capita [31]. The Human Development Index (HDI) is a globally accepted measure. Unfortunately, it does not reflect the true developmental situation in the developing countries such as Nigeria. Critics argue it falls short in capturing the complexities of development, where issues such as gender disparity, poverty, unemployment and inequality persist. The HDI, though valuable, does not fully reflect recent policy changes or address

aspects like human security, empowerment and inequality ([32] by UNDP) (hdr.und p.org/data-center).

Seers [33] advocated a comprehensive approach to development, emphasizing poverty reduction, employment generation, and reduction in inequality, improvement in health, education and living standard in addition to topline measures like increase in GDP per capita growth. He argued that a narrow focus on economic growth, without considering its impact on poverty, inequality and unemployment reduction (social welfare) could lead to skewed development. The ideas put forth by these scholars [26, 33] significantly influenced the shift towards a broader understanding of poverty and development. However, Dudley Seers, a British economist, provided a comprehensive framework for understanding economic development, a concept that replaced the growth fetishism with social development, a theory he propounded known as Seers' Three-Pillar Model. In 1969, he signaled this shift about the meaning of development succinctly emphasizing that genuine economic development transcends mere increase in per capita income, requiring a simultaneous improvement in all three critical dimensions. World Bank [34] aligned with Seers' development concepts, defining development as progress in the quality of life encompassing higher income, quality education, improved health and nutrition, poverty reduction, a hygienic environment, equal opportunities, enhanced personal freedom, and an enriched cultural life. This perspective from the World Bank implies that development is a multi-dimensional process characterized by significant transformations in social structure, national institutions, and the acceleration of economic growth.

#### *2.1.2 Public health expenditure*

Public health expenditure refers to the financial resources invested by the government to promote and maintain the health of its citizens. World Bank [35] defines public health expenditure as covering the provision of health services (preventive and curative), family planning activities, nutrition activities and emergency aid designated for health but does not include provision of water and sanitation. All can be financed through domestic funds or through external resources. Ndedi et al. [36] in Olayiwola et al. [37] argued that health expenditure means investment in health sector and infrastructure, spending on medical care, community health activities, prevention, rehabilitation, health administration and regulation, and capital formation which indirectly means investment in human capital and leads to human capital accumulation.

Health status is a crucial determinant of the quality of human capital resources, which helps to promote economic growth and development of a nation [38]. Health is recognized as an essential component of human development. According to Gyimah-Brempong and Wilson [39] health is a crucially important economic asset for many poor people and their livelihoods depend upon it.

#### *2.1.3 Global health security (GHS)*

WHO [4] defines global health security as "the activities required, both proactive and reactive, to minimize vulnerability to acute public health events that endanger the collective health of the populations living across geographical regions and international boundaries." It focuses on preparing, preventing, detecting, and responding to infectious disease threat that have the potentials to cross borders and spread rapidly,

*Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

endangering human health and economies worldwide. This includes efforts to strengthen healthcare systems, improve surveillance and response capabilities, and promote international collaboration to address health emergencies effectively. However, strong healthcare systems are foundational to effective global health security. This involves investments in healthcare infrastructure, workforce development, and access to essential medical supplies and treatments [40].

#### **2.2 Theoretical underpinning**

#### *2.2.1 Theories of public expenditure*

Adolph Wagner, a German economist, in his Law of "increasing state Activities" states that, there are inherent tendencies for the activities of the government to increase both extensively and intensively. He postulates that during the process of economic development the share of public spending in national income tends to expand [41]. Hence, there is a functional relationship between the growth of an economy and government expenditure. The expansion in government activities leads to the increase in public expenditure which automatically leads to the growth in the economy [42–45]. Thus, the expansion of public expenditure can be seen as a product of the economic development and not vice versa (Bird [46] in [47]).

#### *2.2.2 Dudley Seers theory of development: Seers Three-Pillars Model*

Development theorist and practitioner such as Dudley Seers and Denis Goulet championed the notion that development entails much more than economic growth or increase in income per capita, but should encompass broader social and human aspects. The Dudley Seers theory of development, also known as the Seers' Three-Pillar Model, was proposed by Dudley Seers, a British economist, in the 1960s. According to Seers [33] the purpose of development is to reduce poverty, inequality and unemployment. Seers shifted away from such believe by asking the following questions about a country's development: What has been happening to poverty? What has been happening to unemployment? What has been happening to inequality? If all three of these have been less severe, then beyond doubt this has been a period of development for the country concerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call the result "development", even if per capita income has soared [33]. Thus, Seers propounded a theory on economic development which emphasized the necessity of addressing poverty, inequality and unemployment as key imperatives for development.

#### **2.3 Profile of health budgetary allocation in Nigeria**

FG budgetary allocations to health sector (in N billion) and health budget expenditure breakdown (2001–2021) have been presented in both **Figures 1** and **2** respectively.

**Figure 1** reveals the variations in the health sector budgetary allocation between 2001 and 2021.

The graph illustrates the allocation of funds to the health sector as a percentage of the total federal budget in Nigeria, considering other funding in the service-wide vote. In 2012, the highest allocation was 6.08% of \$29,276.71 (N4, 648,849), and subsequent years (2016–2021) saw marginal increases, with percentages ranging from

#### **Figure 1.**

*Trend of Nigeria budgetary allocation to health sector with shortfall in the 15% Benchmark (2001–2021).*

#### **Figure 2.**

*Trend of health budget shortfall in the 15% Benchmark in Nigeria (2001–2021). Source: [20], (PACFaH Scale) 2021.*

4.13%, 4.17%, 4.51%, 4.75%, 4.14% and 4.18% respectively. This slow upward trend reflects a deviation from the Abuja Declarations of 15% benchmark, indicating insufficient commitment of FG to prioritizing health.

Despite the COVID-19 pandemic, there was no substantial increase in health budget allocation either to meet African Union's 15% or the WHO's 11% benchmark. This suggests a notable gap between budgetary allocations and the healthcare needs of the population, potentially hindering economic development. The persistently low health expenditures may be a contributing factor to Nigeria's sluggish economic growth and development. Consequently, understanding the impact of public health expenditure on economic development in Nigeria becomes a crucial area for

*Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

investigation. The aim of this study is to inspire a new perspective among policymakers, urging them to adopt strategies that simultaneously enhance public health, improve health status/outcomes, and foster economic development, thereby creating a more robust and resilient global health security framework. However, **Figure 2** shows a clearer trend of the overall health budget to budget size, budget as a percentage of budget size and 2001 Abuja declaration of 15% funding benchmark.

**Figure 2** is a clear indication that the FG budgetary allocations which fell far below the 15% Abuja benchmark were abysmally low and grossly inadequate. Even the COVID-19 pandemic that causes a wide scare among Nigerians did not provide desired stimulus to the FG to prioritize health by increasing budgetary allocation to the health sector. Overall health budget to budget to budget size was 4.45% as at 2021 while Budget as % of budget size was 4.18 in 2021.

#### **2.4 Empirical literature review**

Previous studies examining the relationship between public health expenditure and economic growth have generally emphasized the importance of sufficient investment in healthcare for achieving positive health outcomes and fostering economic growth. However, studies specific to Nigeria have shown mixed results, with challenges such as inefficient resource allocation, weak health infrastructure, and high disease burden hindering the effectiveness of health investments. Moreover, the interplay between health status indicators and economic development in Nigeria has been a subject of debate, with some scholars arguing for a causal relationship and others suggesting a more complex interaction. Understanding these dynamics is crucial for designing evidence-based policies to strengthen Nigeria's health system and enhance its contribution to global health security. Therefore, exploring the intricate connection among public health expenditure, health status, and economic development in Nigeria, alongside the innovative concept of introducing a composite economic development index (EDI) as a metric, is imperative for informing strategies to improve healthcare, enhance well-being, and bolster global health security.

Makuta and O'Hare [15] investigated the relationship between public health spending (PSH), quality of governance (QoG), and health outcomes in Sub-Saharan Africa from 1996 to 2011. Using a two-staged least square (2SLS) regression technique on panel data from 43 countries, the study found that improving the quality of governance positively impacted health outcomes. Additionally, the research revealed that the same increase in public health spending is twice as effective in reducing under-five mortality and increasing life expectancy in countries with higher quality of governance compared to those with poor governance. In summary, the study emphasizes the significant role of governance quality in enhancing the effectiveness of public health spending on health outcomes in Sub-Saharan Africa.

#### **2.5 Review of Literature**

Ibe and Olulu-Briggs [48] examined the impact of public health expenditure on economic growth in Nigeria from 1981 to 2013. The results showed that increasing public health expenditure in Nigeria positively and significantly impacts economic growth, and a unidirectional causality was observed between GDP and all public health expenditure variables, including gross capital formation, total education, and total health expenditure, as indicated by various analytical techniques including OLS regression, co-integration, and Granger causality used in the study. Their results

suggest a need for policymakers to prioritize healthcare budget allocations for sustained economic development, despite the study's limitations, such as the inclusion of non-associative variables like total education expenditure.

Boachie and Ramu [49] studied the effect of public health expenditure and health status in Ghana. The study covered the period, 1990–2012. Study employed standard OLS and Newey-white estimation technique. After controlling for real per capita income, literacy level and female participation in the labour market, results indicate evidence that the declining infant mortality rate in Ghana is explained by public health spending among other factors. Thus, they concluded that public healthcare expenditure is associated with improvement in health status through reduction in infant mortality. The study constitutes suitable reference materials for the present study.

Piabuo and Tieguhong [50] conducted a comparative analysis on the impact of health expenditure on economic growth in Central African State (CEMAC) countries and other selected African nations. They used three panel regression models and found that health expenditure positively influenced economic growth in both groups. Additionally, a negative significant relationship existed between household expenditure and GDP per capita for five African countries, while CEMAC countries showed a negative non-significant relationship. The study highlighted a bidirectional causal relationship between GDP per capita and health expenditure in CEMAC, contributing valuable techniques for comparative analysis.

Boachie et al. [51] re-examined the relationship between government health expenditure and health outcomes in Ghana from 1980 to 2014. Using life expectancy, infant, and under-five mortality rates as health outcome measures, the research employed both OLS and 2SLS estimators. The findings indicated that, apart from income, an increase in public health expenditure was associated with improvements in health outcomes in Ghana. Specifically, higher public health expenditure correlated with reduced infant and under-five mortality rates per 1000 live births and an increase in life expectancy at birth. This study provides valuable reference material for a detailed analysis in the present dissertation.

Udeorah et al. [52] studied the impact of health care expenditure on economic growth in Nigeria from 1980 to 2016. The study used descriptive statistics and Generalized Method of Moments (GMM) test for data analysis. Findings indicate that, healthcare expenditure had no significant impact on economic growth; and education expenditure had positive significant impact on economic growth. Policy implication of findings is the need for government to embark on massive health education of citizens to foster economic growth. Its analytical framework is robust. It has relevance as a guide in the conduct and advancement of the present study.

Obienyi et al. [53] examined the effects of health outcomes, measured by life expectancy, on labor productivity and industrial output in Nigeria. The study spanned across 1981–2015. Using a simultaneous regression model with the aid of three-stage least square (3SLS) estimation, the study indicate the significant positive impact of health outcomes on labor productivity and subsequent effects on industrial output. However, health outcomes are not significantly influenced by health expenditure, emphasizing the need for increased funding in the health sector.

Dhrifi [54] carried out a study titled, "Health-care expenditure, economic growth and infant mortality: evidence from 93 developed and developing Countries". The study spanned across 1995–2013. Study employed three-stage least square techniques for data analysis. Results indicate that health expenditure has a positive effect on reducing child mortality only for upper-middle income and high income countries, whereas for low-income and lower-middle income countries, health spending does

#### *Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

not have a significant impact on child health status. Furthermore, public health spending has a greater effect on mortality rates than private expenditure at lower development levels. At high development levels private health expenditure has a positive impact on child mortality. This study is relevant to the present study as it has yielded suitable reference materials for a detailed analysis.

Ibikunle [55] studied life expectancy, public health spending and economic growth in Nigeria. The study covered the period, 1995–2017. Situational analysis, ordinary least square and the granger causality test were employed for data analysis. Results from situational analysis indicate that the trend of GDP and life expectancy were upward while health expenditure had an irregular trend. The OLS results indicate that both government spending on health and life expectancy had positive significant effect on GDP. Furthermore, the results indicate unidirectional relationship between life expectancy and GDP and; a bidirectional relationship between life expectancy and healthcare spending. There is no causal relationship between health expenditure and GDP. Policy implication of the findings is the need for government to increase spending on health so as to improve the health status of individuals. The major weakness of the study is the application of multiple regression and ordinary least square analysis in a study involving small sample and reporting economic development instead of economic growth. However, the study was considered relevant as its findings would be useful for accommodating findings from the present study.

Nwani and Kelikume [56] studied "public health expenditure, health status and economic growth: New evidence from Toda-Yamamoto approach for Nigeria". Study spanned across 1981–2018. The study employed Toda-Yamamoto techniques for data analysis. The result based on the co-integration showed that public health expenditure, health status and economic growth have long run association. Toda-Yamamoto causality test result revealed the absence of causality between health expenditure and health status. Similarly, health status and economic growth are not causally interdependent. On the basis of the findings, the study vehemently concludes that efforts to stimulate economic growth by targeting health outcomes improvement through public expenditure will be futile.

Edeme and Olisakwe [57] linked public health expenditure, economic growth, and health outcomes in Nigeria, employing pairwise Granger causality. The study reveals that increased public health expenditure decreases infant mortality rates, with a unidirectional causality from public health expenditure to economic growth.

Anowor et al. [58] explored the nexus between healthcare financing and economic performance in ECOWAS countries from 1985 to 2017. Using Panel autoregressive distributed lag (PARDL), they found both private and public expenditures had a significant positive effect on economic performance. The study emphasized the importance of involving private healthcare institutions in health policy formulation for coordinated health professional activities. The study has its strength in its use of panel data and a strong analytical framework that supported the extensive estimation of variables included in the model. It has relevance to the present study in the sense that its findings were found useful for the purpose of comparison.

Ndaguba and Hlotywa [59] examined the impact of public health expenditure on economic development in South Africa. Study spanned across 1996 and 2016. Time series data were used for the study. The study applied VECM, VARS, OLS, and ADRL and Phillips-Perron (PP) for data analysis. Findings indicate that there is no causeeffect relationship between public health expenditure and economic development in South Africa. There is positive significant relationship between public health expenditure and HDI. There is inverse relationship between unemployment and economic

development. There is a direct relationship between population growth and economic development; and there is a direct relationship between public health expenditure and HDI. The major weaknesses of this study are the use of HDI as a proxy for economic development and the application of multiple regression techniques in a study involving small sample. However, the study has yielded variables which were considered relevant for inclusion in the present study.

Khalid and Qayyum [60] analyzed the growth-health relationship in Pakistan from 1990 to 2020 using ARDL. They found strong short-term ties among GDP, foreign direct investment, fertility, and life expectancy, with fertility rate having a significant long-term effect on GDP. Despite a deviation from the study's objectives, the findings provided suitable reference material for the present study.

Olayiwola et al. [37] examined the connection between public health expenditure and economic growth in Nigeria within the context of Wagner's Theory. The study covered the period, 2000–2016. Using granger causality test, they concluded that there was a long-run relationship between public health expenditure and economic growth but a unidirectional causal relationship, challenging Wagner's theory. Despite the weakness, the results of the study have provided insight into the possible outcomes of the present study.

Ewurum [6] examined the nexus among public health expenditure, environmental pollution, governance and health status in Nigeria. The study covered the period 1981–2020. Using ARDL and 2SLS, results revealed a negative and significant effect of public health expenditure on health outcome (IMR and U5MR). Also that increase in economic growth is associated with an improvement in the health status of the population in Nigeria.

Canbay and Kirca [61] conducted a review of the bidirectional causal relationship between health expenditures and per capita income in BRICS+T countries from 2000 to 2018. Applying bootstrap, they found uni-directional causal relationships from per capita income to total and public health expenditures in various countries, providing valuable insights and analysis techniques for the present study.

### **3. Research methods**

#### **3.1 Theoretical framework**

The chapter is anchored on Wagner's law of increasing state activities" which states that during the process of economic development, the share of public spending in national income expands, that is, public expenditure is endogenous to economic development. Hence, there is a functional relationship between the growth of an economy and government expenditure [41]. Also, this chapter utilizes Seers' Three-Pillar model—examining poverty, inequality, and unemployment—to assess the development of a nation like Nigeria, emphasizing that genuine economic development transcends mere increases in per capita income, requiring a simultaneous improvement in all three critical dimensions.

#### **3.2 Model specification**

To evaluate the relationship among public health expenditure, health status and economic development in Nigeria: global health security, the works of Dhrifi [54] simultaneous equation model was adopted with some modifications. Hence, three key *Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

variables namely, public health expenditure, health status and economic development were modeled within simultaneous equation framework and these three variables are endogenous.

The primary objective of this paper is to examine whether increased public health expenditure has the potential to reduce key components of the composite economic development index (EDI), namely poverty, inequality, and unemployment. This is to be achieved by examining how such expenditure positively impacts on the health status of the population through reduction in mortality rates, with a subsequent analysis of the significance of any observed effects on these economic and healthrelated indicators. Thus, the study has three equations to estimate the objective of this chapter. The three equation models are specified as follows:

EDI ¼ f PHExp, HS, RGDPpc, LR,WATER, PHY, LEXP, Upop, QoG, PvHE ð Þ (1) PHExp ¼ f EDI, HS, RGDPpc, LR,WATER, PHY, LEXP, Pov, Upop, QoG ð Þ (2) HS ¼ f EDI, PHExp, RGDPpc, LR,W ð *=*ELECT, PHY, Pov, LEXP, Upop, QoG, PvHEÞ (3)

Building upon the extant literature that explores the relationship among public health expenditure, health status and economic development, this chapter seeks to elucidate the nuanced relationships within this triadic framework by explaining the set of the explanatory variables which includes public health expenditure (PHExp) measures by domestic general government health expenditure per capita, representing health financing; health status index (HS) is a composite health status index constructed as a linear combination of infant mortality (IMR), under-five mortality (U5MR), maternal mortality (MMR) and crude death rate (CDR); real gross domestic product per capita (RGDPpc); literacy rates (LR) representing female education; water/electricity representing health infrastructure and sanitation; Doc/Physician density (PHY) representing human resource for health: life expectancy (LEXP) is included as a covariate and the rationale for selecting life expectancy stems from the intention to investigate if enhancing the health status of the citizens, as reflected in increased life expectancy, correlates with and potentially contributes to the attainment of sustained economic development. Poverty (Pov); Urbanization (Upop) captured by urban population; quality of governance (QoG) measured by control corruption; and private health expenditure (PvHE) represented by domestic general private health expenditure per capita. Also, composite economic development index (EDI) is a measure that combines multiples of indicators such as poverty, inequality and unemployment to assess the overall economic development of mostly the developing countries. However, this EDI was developed by the researcher to assess the economic development of Nigeria.

Given the measures for composite economic development index represented as EDI, a composite index function was computed with the use of principal component analysis. This composite index is a combination of three (3) components—Poverty, Inequality and Unemployment as defined by Dudley Seers [33]; Public Health Expenditure and health outcomes (HS), the above general models are stated in a structural form as follows:

#### **3.3 Structural forms of the model**

Equation 1: Impact of public health expenditures and other covariates variables on economic development.

$$\begin{aligned} \text{EDI} &= \mathbb{K}\mathbf{o} + \mathbb{K}\_1 \text{PHExp} + \mathbb{K}\_2 \text{HS} + \mathbb{K}\_3 \text{RGDPpc} + \mathbb{K}\_4 \text{LR} + \mathbb{K}\_5 \text{W/ELECT} \\ &+ \mathbb{K}\_6 \text{PHY} + \mathbb{K}7 \text{LExp} + \mathbb{K}\_8 \text{Upp} + \mathbb{K}\_9 \text{QoG} + \mathbb{K}\_{10} \text{PvHE} + \text{V}\_1 \text{t} \end{aligned} \tag{4}$$

Equation 2: Impact of economic development on public health expenditure.

$$\text{PHExp} = \lambda \text{o} + \lambda\_1 \text{EDI} + \lambda\_2 \text{HS} + \lambda\_3 \text{RGDPpc} + \lambda\_4 \text{PHY} + \lambda\_5 \text{POV} + \lambda\_6 \text{Upp} + \lambda\_7 \text{QoG} + \text{V}\_2 \text{t} \tag{5}$$

Equation 3: Impact of economic development and public health expenditure on health outcomes.

$$\begin{aligned} \text{HS} &= \beta \mathbf{o} + \beta\_1 \mathbf{EDI} + \beta\_2 \mathbf{PHExp} + \beta\_3 \mathbf{RGDPpc} + \beta\_4 \mathbf{LR} + \beta\_5 \mathbf{W}/\text{ELECT} + \beta\_6 \mathbf{PHY} + \beta\_7 \mathbf{Power} \\ &+ \beta\_8 \text{LEX} + \beta\_9 \mathbf{Upp} + \beta\_{10} \mathbf{QoS} + \beta\_{11} \mathbf{PvHE} + \mathbf{V\_3t} \end{aligned} \tag{6}$$

There are only three structural relationships. Thus, EDI, PHExp and HS are endogenous variables and the models are over-identified. Hence, OLS is not the preferred method for estimating the structural equations. Given that the model is over-identified, instrumental variables (IV) estimation techniques (3SLS) is more appropriate. IV methods help address endogeneity and measurement error in the independent variables, providing more reliable estimates in over-identified models. The error terms V1t, V2t, and V3t are called structural disturbances. The coefficients are ⋉o-⋉10, ⋋o- and *β*o-*β*11**.**

This chapter sourced its data from the World Bank, World development indicators, Central Bank of Nigeria, National Bureau of Statistic, series of health issues publication, Global Statistical books, African Research Review, World Health Organization (WHO). Study used annual time series data for Nigeria spanning over the period, 1981–2020. The study employed interpolation, where necessary, to fill missing data. This gave us a larger sample size.

### **4. Data presentation, analysis and discussion of results**

#### **4.1 Summary of descriptive statistics**

In order to gain insight into the nature and characteristics of the data, the descriptive statistics of all the variables over the period, 1981–2020 are reported in **Table 1**.

### **4.2 Three stage least squares (3SLS) results for public expenditure, health status and economic development interrelationships**

**Table 2** presents the results for the system estimation of the simultaneous equations based on the three-stage least squares (3SLS) procedure for the composite health status index, public health expenditure and economic development equations. For the system estimation, the first two lags of each of the composite health status index, public health expenditure and composite economic development index are used as instruments.

It is important to note that for the composite health status, higher values would signify worsening health status while low values would indicate improving health

*Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*


#### **Table 1.**

*Descriptive statistics.*

status due to reduction in mortality rates. Similarly, the composite economic development index is constructed in the same fashion as the health status where higher (lower) values indicate deteriorating (improving) development outcomes. Higher inequality, poverty and unemployment are suggestive of poor development outcomes.

In **Table 2**, result for the health status (HS) equation, indicates that the composite economic development index (EDI) which depicts deteriorating development conditions has the tendency to worsen the composite health status due to its positive effect. This is also true for the poverty rate which has a positive effect as well. On the other hand, higher income level is associated with an improvement in the composite health outcome due to its negative effect; the negative effect also holds for literacy rate, health infrastructure proxied by the composite indicator from water and electricity, physician density, life expectancy and the corruption index. However, these variables are not statistically significant. This is contrary to the findings by Dhrifi [54] and Boachie et al. [51].

Meanwhile, the variables with statistically significant effect are both the public and private health expenditure. Public health expenditure has a negative effect on overall health status with a 1% increase corresponding to a 0.022 percentage point decline in health status. This means that public health expenditure is vital and very important for improving the overall health status and conditions in the country. Moreover, health is an important component of public service delivery of which its provision is the responsibility of government. Through effective and efficient utilization of public resources towards the provision of quality and efficient healthcare service delivery, the health conditions of the teeming populace can be significantly enhanced with increased accessibility and affordability. Hence, public health spending in providing the requisite health infrastructures, equipment and medicines, and as well a wellqualified healthcare personnel is an indispensable factor. Similar result has been found by Boachie, et al. [51].


*Embolden are variables with statistical significance. All variables are expressed on their natural logarithmic*

*transformation. Source: Author's Computation using Eviews 12. \**

*Significance level for 10%.\*\*Significance level for 5%.\*\*\*Significance level for 1%.*

#### **Table 2.**

*3SLS results for public heath expenditure, health status and economic development global health security.*

Meanwhile, private health expenditure has a positive effect with a coefficient elasticity of 0.049 implying that private health expenditure is associated with deteriorating overall health status. While this may be counterintuitive, one possible explanation is that there is limit to which private spending can contribute to improved health conditions. The saying that "money can buy medicine, but it cannot buy health" suffices for this evidence especially in the context of Nigeria where "medical tourism" has been on the increase especially among the elites and public officials due to the dysfunctional nature of the country's healthcare system. Thus, for others that cannot patronize foreign medical services, they are limited to what is available locally which is mostly inadequate for treating life-threatening ailments.

Result for public health expenditure (PHExp) equation, indicates that the composite economic development index, private health expenditure and corruption index are unimportant due to their statistical insignificance. Meanwhile, the effect of composite health status is significant at 1% with a coefficient elasticity of 25.71 percentage point. In other words, it implies that worsening health status leads to a reduction in public health expenditure. While this result is counterintuitive as deterioration in

#### *Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

health conditions should stimulate more public health spending to curb the trend, the evidence is suggestive of the dilemma in the Nigerian case where public expenditure is insufficient to provide adequate healthcare service delivery to the teeming population. As already known, the budgetary allocation for the health sector in Nigeria is grossly inadequate to cater for the ever-expanding demand for healthcare services.

The impact of income level is associated with a reduction in public health expenditure. Specifically, 1% increase in the income level leads to 5.75 percentage point reduction in public health expenditure. This effect is statistically significant at the 10% level. Again, the result is counterintuitive because it suggests that as income increases, government's effort towards providing affordable healthcare service delivery through its health spending might decline. Interestingly too, with expansion in the income level, the individuals may substitute the patronage of public for private healthcare services given the low quality of public healthcare delivery. Further, the impact of physician density has a negative effect on public health expenditure. In this case, a 1% increase in the physician density will result in a 0.854 percentage point reduction in the public health expenditure. The crux of this result boils down to the quality of the physicians. If the skills of the physicians are high, then government spending for training and re-training may reduce overtime with increased effectiveness and efficiency. On the other hand, if the physicians are poorly trained and less skilled, government will have to spend significant resources either for re-training or recruitment of better qualified health personnel. This result is in line with the findings by [55].

The impact of poverty and urban population on public health expenditure are positive and statistically significant at the 1% level. For instance, a 1% increase in the poverty level and urbanization rate will lead to 22.57 and 13.26 percentage point increase in public health expenditure. By implication, high poverty level will entail less accessibility and affordability of healthcare service delivery, of which a possible remedy would be for government to subsidize health services which in turn will mean an increase in health spending. Similarly, an expansion in urbanization will create higher demand pressure on existing healthcare services and facilities, and in turn, government will have to increase health spending in other to expand such facilities through the construction of new healthcare centres, employment of new healthcare personnel, and provision of medical equipment and drugs etc. In a nutshell, the overall result show that public health expenditure in Nigeria is more responsive to existing health conditions (status), the income level of the citizens, the number and density of physician or medical practitioners, the existing poverty level and the state of urbanization in the country. This is similar to the findings by Nwani and Kelikume [56].

Lastly, for the economic development index (EDI) equation, the impact of public health expenditure and health status on the composite economic development index is examined. The impact of public health expenditure is positive though statistically insignificant. This means that public health expenditure may not be a strong determinant of economic development through lowering inequality and poverty as well as unemployment. This result clearly describes the Nigerian situation where budgetary allocations for public health expenditure are significantly small and insufficient to facilitate effective and efficient public health service delivery. Other variables which are relatively non-significant in the economic development equation include literacy rate, physician density and corruption level. On the other hand, the impact of composite health status is positive with an elasticity of 0.688 and significant at the 1% level. This means that a 1% increase in the health status variable which signifies deteriorating health conditions lead to 0.688 percentage points deterioration in the

development outcomes. Put differently, an improvement in health status is associated with better development outcomes which enhance productivity due to healthy living and access to quality healthcare services. Similarly, the impact of income level has a negative effect with an elasticity of 0.221 and statistical significance at the 1% level. Thus, a 1% increase in the income level reduces the composite economic development variable by 0.22 percentage points. This means that higher income will result in better development outcomes as it will reduce the inequality and poverty gaps and by implication unemployment as more people become employed due to an expansion in economic activities. This is in line with the findings by Eneji et al. [9]; Deluna and Peralta [62].

The impact of water and electricity infrastructure on composite economic development index is positive with an elasticity of 0.016 and statistical significance at the 5% level. The significance of this variable underscores the important of water accessibility and adequate and stable power supply for rapid economic development. Both variables are indispensable in all facets of human activities, and so, contribute to sustainable development. Further, the impact life expectancy on the composite economic development index is negative with a coefficient of 0.899 and statistical significance at the 5% level. Higher life expectancy can contribute to economic development through a larger proportion of active labour which can be harnessed to boost productivity growth. In the same vein, private healthcare expenditure also leads to better development outcomes. An increase in private healthcare expenditure by 1% leads 0.096 percentage point reduction in the composite development measure which signifies better development outcomes. Meanwhile, the effect of urban population is positive with a coefficient elasticity of 0.369 and statistical significance at 5% level. In other words, a 1% increase in urbanization rate is associated with 0.369 percentage points deterioration in economic development. This can be explained by the fact that greater urbanization without corresponding surge in job opportunities and employment nor adequate infrastructural provisions can lead to poor living conditions, urban sprawl, negative externalities, which ultimately would tend to worsen or retard sustainable development. Similar findings can be seen in Edeme and Olisakwe, [57].

In summary, the results clearly provide evidence on the significant effect of public health expenditure on the composite health status in the health status equation, and also a reverse significant effect of the composite health status on public health expenditure in the health expenditure equation. This means that there is a bi-directional relationship between public health expenditure and the composite health status. Meanwhile, in the economic development index equation, the direct impact of public health expenditure is non-significant whereas the composite health status is significant. Judging from the foregoing, it can be inferred that the impact of public health expenditure on economic development works through the health status channel. This is because public health expenditure affects the composite economic development index indirectly through its effect on composite health status. Importantly, such development enhances the nation's capacity to effectively respond to global health security challenges, reducing vulnerability to diseases, and fortifying overall health security.

#### **4.3 Discussion of empirical results**

Results from the three-stage least squares (3SLS) estimation indicates that public health expenditure contributes to reducing the composite measure of health status.

#### *Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

The effect is negative and statistically significant, and supported by studies such as Eneji et al. [9] and Dhrifi [54]. On the other hand, composite health status index affects public health expenditure negatively and significantly. This means that there is a bi-directional causal relationship between public health expenditure and health status. This evidence is similar to Ibikunle [55] who found a bidirectional relationship between life expectancy as a measure of health outcomes and healthcare spending; but it's in contrast to some other studies such as Obienyi et al., [53]; Nwani and Kelikume [56].

Also, the composite measure of health status affects positively and significantly the composite measure of economic development; whereas there is a positive reverse effect from the composite economic development index to the composite health status though the relationship is statistically insignificant. This implies that there is a unidirectional causal relationship from health status to economic development. In other words, improving health conditions can be catalytic to economic progress and development. Lastly, there is no causal relationship between public health expenditure and the composite measure of economic development. This evidence is support by the study of Ibikunle [55] that found no causality between health expenditure and economic growth in Nigeria.

Overall, the results suggest that public health expenditure affects the composite economic development index indirectly by reduction in poverty, income inequality and unemployment through its effect on composite health status. In other words, an increased public health spending channeled towards providing the requisite health care infrastructures, healthcare subsidies, medical personnel, and effective healthcare service delivery fosters a healthy, vibrant and energetic population and labour force, which in turn, boost labour productivity which is essential for achieving sustainable economic development. Thus, the development initiatives not only improve the health and well-being of the population but also create a foundation for a resilient and secure nation that can effectively respond to and mitigate global health security challenges.

In summary, a resilient and well-functioning national health system is not only a fundamental component of a healthier nation but also a cornerstone for global health security and cooperation. It represents a commitment to the well-being of citizens and contributes to the stability and prosperity of the global community. It suggests that they are actively participating in and promoting activities that foster economic development, reduced poverty, and enhance the overall welfare of their population.

### **5. Conclusion**

This study evaluates the interrelationship among public health expenditure, health status and economic development in Nigeria. The study applied Dudley Seers' 'Three-Pillar Model' of development on Nigeria economy. This was achieved by developing a composite economic development index (EDI) as measure for economic development. The overarching conclusion derived from this study is that public health expenditure exert significantly and positively on health status to foster economic development through the instruments of income, health education, development of health infrastructure, poverty reduction, employment creation, reduction in income inequality which shows the better income and wealth distribution, physician density, urbanization, quality of governance and reduction in healthcare costs. What this implies is that health status of the citizens is a critical medium through which public

health expenditure impact positively on economic development, but government must ensure adequate allocation of resources to health sector, reliable power generation and distribution, reduction in mortality rates, reduction in poverty, unemployment rates, income inequality and corruption. When Nigeria invests in healthcare, improves the health of its citizens, and experiences economic development, it not only benefits its own population but also contributes to global health security by reducing the risk of diseases spreading beyond its borders. It's a way of creating a healthier and safer world for everyone.

## **Author details**

Ngozi Chioma Ewurum1 \* and Samuel Oseloka Okafor<sup>2</sup>

1 Department of Economics, Michael Okpara University of Agriculture, Umudike, Nigeria

2 Department of Economics, Nnamdi Azikiwe University, Awka, Nigeria

\*Address all correspondence to: ewurum.ngozi@mouau.edu.ng

© 2024 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

*Global Health Security: An Evaluation of Public Health Expenditure, Health Status… DOI: http://dx.doi.org/10.5772/intechopen.114264*

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## **Chapter 10**
