1

ASSESSMENT OF SECTORIAL BUDGET ALLOCATION MANAGEMENT ON

GDP IN NIGERIA HEALTH SECTOR
 2

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria operates a federal system of Government which comprises the federal government, 36

States plus the Federal Capital Territory (FCT), and 774 Local Government Areas/Councils

(LGAs). The 36 states and the FCT are also grouped into six geo-political zones, namely: the

South-South, the South-East, the South-West, the North-East, the North-West and the North

Central zones. The Nigerian health sector is broad and comprises of public, private for-profit,

nongovernmental organizations (NGOs), community-based organizations (CBOs), faith-based

organizations (FBOs), and traditional health care providers.

Budget allocation management of Nigeria health sector involves health allocation go to three

tiers of government namely federal, state and local government and these three tiers of

government use their health allocation to three tiers of health services – the primary, secondary

and tertiary respectively. The primary health service, which is closest to the people, is said to be

the constitutional responsibility of local government while, the State Ministries of health are

generally responsible for secondary care. The tertiary health service deals with the most

difficult/complicated/specialist cases referred from secondary health systems to teaching and

specialist hospitals and are supervised by the Federal Ministry of Health (FMOH). FMOH also

has responsibility to develop policies, strategies and plans that provide direction for the national

health care delivery system. Other providers of health care include the private sector health

facilities (i.e. private for profit, private not for profit) including religious missions and NGOs,

private pharmacies, drug retailers and traditional healers.

 3

Health is one of the most important factors that determine the quality of human capital, a

necessary factor for economic growth. In line with the above, a consensus of opinion have been

formed among researchers recognizing health as a public good, the demand and supply of which

cannot be left at the mercy of invisible hands or profit maximizing individual as well as on

considerations of utility maximizing conduct alone . Hence, the need for the government to play

a major role in delivering good and qualitative healthcare services that is accessible and

affordable for the teeming population. The recognition of the importance of the above led the

World Health Organisation (WHO) to propose at the 2010 World Health Assembly, issues that

will address financing of health, which will ensure qualitative and affordable healthcare services

(Ataguba and Akazili, 2010). The pattern of health financing is therefore closely and indivisibly

linked to the quality of health outcomes (health status), capable of achieving the long term goal

of enhancing nation’s economic development (Riman and Akpan, 2012). Alluding to the above

fact and as an evidence of its commitment towards the restructuring of the health sector in its

fiscal operation, the Nigeria government has taken up the responsibility of providing good

healthcare facility for its citizens by improving on the amount of its expenditure on health.

Available data indicated that on the average about 2.1% to 5.8% of total government expenditure

were expended on health within 2000 and 2007 (Mordi, Englama and Adeusuyi, 2010). The

belief is that this would improve the health of the citizenry that can translate into healthy human

capital base with its multiplier effects on economic growth and development.
 4

1.2 Statement of the Problem

Governments, organisations and individuals prepare and execute or implement budgets as a

control measure for revenue and expenditure. In Nigeria, every ministry, department and agency

(MDA) of government prepares its own budget separately and forwards this to the appropriate

authority. This body then aggregates the separate budgets into one volume for which approval is

sought from the legislature/House of Assembly (HOA) over that jurisdiction. After the

components of the budget may have been debated, adjusted and the House of Assembly (HOA)

approves, it is assented to by the leader of the executive within that jurisdiction and adopted as

the appropriation bill for the period. Budgetary allocations for different sectors, ministries,

departments and agencies (MDAs), institutions, organisations, parties, individuals serve to guide

the implementing/ executing parties in the control of their revenue inflows and channel their

revenue towards achieving set outcomes such as contribution to economic growth when

employed optimally. It is therefore necessary to investigate whether budgets are fulfilling their

intended purpose.

In Nigeria, however, the rate of budget execution is suboptimal. In almost every country, the

implemented budget varies from the adopted one which is brought about by the country’s fiscal

conditions, stability and certainty in the country’s finances, the role of the finance ministry and

the type of budget system (Kazeem, Bwala, & Dunga, 2019). Many issues have, overtime

hindered the successful preparation and implementation of adopted budgets at almost every level

in government including late budget preparation, slow passing of budgets by the legislature,

budget padding, poor execution. Even after the budget may have been passed by the legislature,

there have been cases where there was a delay in assent by the executive powers. Next after

assent and adoption of the budget as an appropriation bill is the issue of implementation. The
 5

level of implementation of budgets affect how much they serve their intended purpose. It is

therefore as important to evaluate the extent of budget execution as it is to draw up, and pass the

budget.

Where budgets are not fully employed or implemented, they are said o have low budget burn rate

or low budget execution rate. Budgets with low burn rate do not usually solve the issues they

were designed to solve or meet the needs for which they were created.

1.3 Objectives of the Study

The broad objective of this study is to examine the effect of sectorial budget allocation

management on GDP in Nigeria health sector. The specific objectives are to:

1) examine the effect of allocation to drugs and medical supplies on GDP in Nigeria.

2) investigate the effect of allocation to National Agency for the Control of AIDS (NACA)

on GDP in Nigeria.

3) verify the effect of allocation to National Health Insurance Scheme (NHIS) on GDP in

Nigeria.

4) ascertain the effect of allocation to Ministry of Health on GDP in Nigeria.

1.4 Research Questions

Owing to the problem statement, this study was channelled towards answering the following

questions:

1) What is the extent to which the allocation to drugs and medical supplies affects the GDP

in Nigeria?
 6

2) What is the extent to which the allocation to National Agency for the Control of AIDS

(NACA) affects the GDP in Nigeria?

3) What is the extent to which the allocation to National Health Insurance Scheme (NHIS)

affects the GDP in Nigeria?

4) What is the extent to which the allocation to Ministry of Health affects the GDP in

Nigeria?

1.5 Research Hypotheses

The hypotheses for the study have been formulated. These null hypotheses are as follows:

Ho The allocation to drugs and medical supplies has no significant effect on the GDP in Nigeria.

Ho The allocation to National Agency for the Control of AIDS (NACA) has no significant effect

on the GDP in Nigeria

Ho The allocation to National Health Insurance Scheme (NHIS) has no significant effect on the

GDP in Nigeria.

Ho The allocation to Ministry of Health has no significant effect on the GDP in Nigeria.

1.6 Significance of the Study

This study is important and very beneficial to government, ministry of health and researchers.

Government: Findings from this study will help government to make policy that will improve

Nigeria health sector because it is an important sector that ensure good health to a country’ s

workforce which in turn increase of productivity of citizens.

 7

Ministry of health: Again, this study is very important to head and staff ministry of health to

make careful use of budgeted fund in line with proposed budget because health is the life wire of

the economy.

Researchers and students: Researchers and students are not left out in the benefits. The study

empirical findings are capable of adding new insights to present knowledge in the field of

management in general but specifically in the area of budget and Nigeria health sector. Thus, this

study would be an additional reference material to Researchers.

1.6 Scope of the Study

The scope of this study is to examine the effect of sectorial budget allocation management on

GDP of Nigeria health sector over a period of 1990 to 2019.The study discusses the concept of

the key words: sectorial budget allocation, GDP of Nigeria health sector, SMEs, components of

revenue allocation formula in Nigeria, institutional framework for revenue allocation in Nigeria,

various budget allocation management recommended by the commissions/committees of revenue

allocation in Nigeria arranging from Prof. Aboyade commission (1978), Okigbo presidential

commission (1980), revenue allocation under Ibrahim Badamasi Babangida (IBB) regime 1985 –

1989, revenue allocation under Abacha regime 1994 – 1998, revenue allocation under president

Olusegun Obasanjo (1999-2007), The Abuja declaration (2001).

1.8 Limitation of the Study

A lot of impediments were encountered in the process of conducting the research. The most

salient of them are:

 8

Time factor —The time for the accomplishment of this study coincided with other academic and

non-academic activities and at such, the researcher could not cover so much in the study. There

is no doubt whatsoever that data collection, presentation, analysis and interpretation require so

much time.7

Availability of verifiable data - Secondary data is not readily, easily available in Nigeria. The

internet-sourced statistical data are not always complete and may be difficult to come by.

1.9 Operational Definition of Terms

Budget: Budget is the government’s forecast of revenue and planned expenditure, usually

provided on an annual basis.

Budgetary allocations: Budgetary allocations are integral components to an annual financial

plan, or budget, of all organizations.

Sectorial Budgetary Allocation: Sectorial Budgetary Allocation is a financial plan used to

estimate revenues and expenditures for a specific period of time on sectors of the economy such

as education, health, defence, transportation, communication etc.

Sectorial Budgetary Allocation management: Sectorial Budgetary Allocation management is

the all encompassing process that includes budget preparation, follow-up, monitoring, release,

execution and evaluation to ascertain the amount released under specific budget headings, budget

burn rates or budget performance of different institutions, ministries, departments and agencies

(MDAs) as one may be interested in.

 9

References

Ataguba, J. E-O., Akazili J. (2010). “Healthcare financing in South Africa: Moving towards
universal coverage”. Continue Medical Education Journal, Vol 28, No 2. Pp.74 -78

Mordi, N. O. C., Abwaku, E., Banji, S. A. (2010). “The Changing Structure of the Nigerian
Economy”. Published by Research Department, CBN, 2010 Pp. 297.

Riman Hodo Bassey (2012) “Healthcare Financing and Health outcomes in Nigeria: A State
Level Study using
Multivariate Analysis” International Journal of Humanities and Social Science vol. 2, No 15
Pp.296-305

World Bank. (1993), World Development Report 1993: Investing in Health. Oxford University
Press: New York, NY. World Bank. (1993), World Development Report 1993: Investing in
Health. Oxford
 10

CHAPTER TWO
LITERATURE REVIEW

2.1 Introduction

This chapter discusses the conceptual framework, theoretical review, empirical review, summary

of literature review and Research Gap in Literature.

2.1 Concept of Sectorial budget allocation management

Budgetary allocations are integral components to an annual financial plan, or budget, of all

organizations. They indicate the level of resources an organization is committing to a department

or program. Without allocation limits, expenditures can exceed revenues and result in financial

shortfalls. Anyone working with budgets should understand how they are used and the

limitations they provide. A budgetary allocation is the amount of cash, or budget, you allocate to

each item of expenditure in your financial plan (Ryckman, 2019).

Sectorial Budgetary Allocation is a financial plan used to estimate revenues and expenditures for

a specific period of time on sectors of the economy such as education, health, defence,

transportation, communication etc. It is a management and planning tool, not just an accounting

document. It assists in the allocation of resources.

Sectorial Budgetary Allocation management is the sharing formula designed by constituted

authority on the amount of funding designated to each sectors of the economy such as education,

health, defence, transportation, communication for a specific period of time. It designates the

maximum amount of funding an organization is willing to spend on a given item or program, and
 11

it is a limit that is not to be exceeded by the employee authorized to charge expenses to a

particular budget line.

Narrowly defined, the budget is the government’s forecast of revenue and planned expenditure,

usually provided on an annual basis. A health budget is the portion of the national budget

allocated to the health sector, including all ministries and agencies involved in health-related

activities. A health budget is more than a simple accounting instrument to present revenues and

expenses – rather, it is a crucial orienting text, declaring the country’s key financial objectives

and its real commitment to implementing its health policies and strategies (World Health

Organization: WHO, 2019).

Budgeting is related to the process of defining the allocation of resources to produce the best

outputs given the level of revenues. A health budget, typically included in the general

government budget, is more than a simple accounting instrument to present revenues and

expenses– rather; it is a crucial orienting text, declaring key financial objectives of the country

and its real commitment to implementing its health policies and strategies (WHO, 2019).

2.1.2 The Various Budget Allocation Management Recommended by the

Commissions/Committees of Revenue Allocation in Nigeria

A close look at the recommendations of the various Revenue Allocation

Commissions/Committees in Nigeria shows the following fourteen principles of revenue sharing

of the national cake:

(i) Basic needs

(ii) Minimum Material Standards

(iii)Balanced Development
(iv) Derivation
 12

(iv)Equality of Access to Development Opportunities,

(v) Independent Revenue/Tax effort

(vi) Absorptive Capacity

(vii) Fiscal Efficiency

(viii) Minimum responsibility of Government

(ix) Population
(x) Social Development Factor

(xi) Equality of States

(xiii) Landmass and Terrain

(xiv) Internal Revenue Generation Effort.

The above principles have continued to serve as the yardstick for revenue allocation up to this
day.

2.1.3 Components of Revenue Allocation Formula in Nigeria

Fundamentally, there are two components of the revenue allocation formula used for the

disbursement of the Federation Account as indicated here under.

Vertical Allocation Formula (VAF) Horizontal

Allocation Formula (HAF)

The Vertical Allocation Formula: This formula shows the percentage allocated to the three tiers

of government i.e. federal, states and local governments. This formula is applied vertically to the

total volume of disbursable revenue in the Federation Account at a particular point in time. The

VAF allows every tier of government to know what is due to it; the Federal Government on one

hand and the 36 States and 774 Local Governments on the other (Bashir, 2008:3).
 13

The Horizontal Allocation Formula: The formula is applicable to States and Local Governments

only. It provides the basis for sharing of the volume of revenue already allocated to the 36 States

and 774 Local Governments. Through the application of the principles of horizontal allocation

formula, the allocation due to each State or Local Government is determined. Thus, it can

conveniently be concluded that the vertical allocation formula is for inter-tier sharing between the

three tiers of government while the horizontal allocation formula is for intra tier sharing amongst

the 36 States and the 774 Local Governments in Nigeria (Bashir, 2008:3)

Institutional Framework for Revenue Allocation in Nigeria

For analytical purpose, the table below provides at a glance the process which takes place

monthly in the allocation of revenue from the Federation Account.

S/N Institution Role

1 Revenue Mobilization,Monitor revenue accruals into and
Allocation and fixed disbursements from the federation account.
Commission It therefore determines the allocation
indices
2 Central Bank of Nigeria A custodian of the federation account
3 Federation Accounts It determined monthly disbursement from
Allocations Committee the federation account. It comprises of
representative of the federal, 36 states
government, RMAFC, OAGF
and other revenue agencies etc.
4 State Joint Local It determines monthly disbursement from
Government Account the State
Joint Local Government Account. It
comprises of representatives of the State
and local governments.
Source: Kabir A Bashir (2008), Workshop paper.
 14

PROF. ABOYADE COMMISSION (1978)

This was a six-member Committee charged with the responsibility of ensuring that each level of
government of the Federation has adequate revenue to enable it discharged its responsibilities
with due regard to the principles of:

(i) Equality of States

(ii) Derivation
(iii) Population
(iv) Even Development
(v) Geographical Considerations
(vi) National Interest

The Committee however, set aside all the criteria mentioned above and instead formulated five
principles for the determination of statutory allocation to the states. These prevailing principles
are as indicated below:

1.
Equality of access to development opportunities 0.25
2.
National minimum standard for National integration0.22
3.
Absorptive Capacity. 0.20
4.
Independent Revenue. 0.18
5.
Fiscal Efficiency. 0.15
Total Weight. 1.00

Furthermore, the Aboyade Committee recommended the sharing of the consolidated fund as
follows:

Federal Government – 5%

State Government – 30%

Local Government – 10%

Special Grants According – 3%

 15

In spite of the fact that a greater proposition of the revenue allocation went to the Federal

Government, the Federal Military government still exerts its influence and ensured the further

inflation of its grant by 3% to the detriment of the federating units. Having done this, the report

of the Aboyade Technical Committee was presented to the Constituent Assembly for approval.

Unfortunately, the Constituent Assembly members failed to give the report the serious attention

it deserved because of their pre-occupation with controversial issue such as the creation of more

state, the Sharia Law Controversy and the formula for election of the President (Adewale,

1960:20) the next Commission on revenue allocation is the Okigbo Presidential Commission

of1980.

OKIGBO PRESIDENTIAL COMMISSION (1980)

The Okigbo Presidential Commission on revenue allocation which was constituted in 1980 gave

the following recommendations for the sharing of revenue:

Federal Government – 55%

State Government – 35%

Local Government – 10%

Just like other post-independence formulae on revenue allocation, the Okigbo Commission

recommendation was accompanied with controversy, disagreement and conflict

(Ademolekun1986:30)
 16

REVENUE ALLOCATION UNDER IBB REGIME 1985 – 1989

The thorniest issue under Babangida regime was the fiscal scheme. The issue of revenue

allocation was so thorny that Babangida regime had to review the revenue allocation four times

during its duration. From the inception of the Babangida regime in 1985 all through 1989, the

formula of revenue allocation stood at:

Federal – 55%

State – 32.5%

Local – 10%

Allocation to the oil mineral producing states, and general ecological problems stood at 1.5% and
1% respectively.

SUMMARY OF REVENUE ALLOCATION FROM 1988 – 1993 (IN BILLIONS)

ALLOCATIONS: 1988 1989 1990 1991 1992 1993
Federal 13.92 14.91 22.71 31.86 47.1 58.2
Government (55%) (55%) (50%) (50%) (50%) (48.5%)
State 8.23 8.807 13.63 19.18 23.58 28.8
Government (32.5%) (32.5%) (30%) (30%) (25%) (24%)
Local 2.53 2.71 6.81 9.59 18.87 24.0
Governments (10%) (10%) (15%) (15%) (20%) (20%)

SOURCE: First Bank: Monthly Business and Economic Reports for 1988, 1989, 1999,
1991, 1992 and 1993

***Notes: Numbers in Brackets are the percentages of allocation.

REVENUE ALLOCATION UNDER ABACHA REGIME 1994 – 1998

Abacha regime adopted and maintained the formula bequeathed to it by the Babangida regime.

This formula is presented below:

 17

Federal Government – 48.5%

State Government – 24%

Local Government – 20%

Special Fund – 7.5%

According to T.Y. Danjuma, the Federation Account here is made up of revenue from the
following sources:

(1) Company income tax

(2) Import Duties
(3) Export Duties
(4) Exercise Duties
(5) Petroleum profit tax
(6) Mining rents and Royalties
(7) NNPC Earnings from Direct States
(8) Pipeline Licenses and fees
(9) Surpluses arising from the sale of Gas
The introduction of Value Added Tax (VAT) in (1996) has also diversified source of fund for the

tiers of government. The formula adopted for the sharing of the VAT fund (vertically) since the

1997 fiscal years is:

Federal Government – 35%

State Government –40%

Local Government –25%

The higher percentage enjoyed by the VAT revenue sharing has been justified by Chief Anthony

Ani – Former Finance Minister when he said: in order to compensate state government whose
 18

incomes from the PAYE (Tax) are likely to be adversely affected by the enhanced allowances

granted tax payer, the VAT distribution formula is further reviewed in favour of state….

REVENUE ALLOCATION UNDER PRESIDENT OLUSEGUN OBASANJO (1999-

2007)

The proposed formula by Revenue Mobilization, Allocation and Fiscal commission gives:

Federal Government – 41.3%

State Government – 31%

Local Government – 16%

Apparently, not satisfied with what it considered an upside formula, the Southern Governors

insist that only equal revenue sharing between the federal government and the states in Nigeria

will be considered fair and realistic by the Southern States. They therefore requested for the

adoption of the following formula for revenue allocation in Nigeria:

Federal Government – 36%

State Government –36%

Local Government –25%

Federal Capital – 1%

Ecology –2%
 19

REVENUE ALLOCATION (2000 – 2010)

The current vertical allocation formula which is based on Presidential Executive order is as
follows:

Federal Government – 52.68%

State Government – 26.72%

Local Government – 20.60%

While the horizontal allocation formula which captures factors/principles and percentage is
as follows:

Equality – 40%
Population – 30%
Landmass/Terrain – 10%
Internally Generated Revenue – 10%
Social Development Factor – 10%

For purpose of emphasis, the Social Development Factor comprised of Education (4.0),
Health (3.0) and water (3.0) (Bashir 2008:7).

2.1.2 Concept of GDP in Nigeria Health sector

Nigeria Health Care Sector

Health services are provided by the private and public sectors. From private sector, there are

non-governmental organization, private for-profit providers, community-based organization and

religious and traditional caregivers. Government assumes the responsibility of health service

provision in public sector. The provision of health services in public sectors are at three levels

namely the Primary, Secondary and Tertiary. At the primary level, services are at the door step of
 20

communities where preventive, curative; primitive and pre-referral cares are provided. Medical

personnel that provide such services are nurses, community health officers, community health

extension workers (CHEWs) and environmental health officers. The available facilities at this

level include health centres, dispensaries, and health.

At secondary level, there are general hospitals to provide medical, laboratory and specialized

health services, namely, surgery, obstetrics, paediatrics, genecology and so on. Major health

workers that are at the secondary level are doctors, nurses, midwives, laboratory scientists and

pharmacists. The typical facility use is general hospitals. Tertiary level of health service

provision is the highest health care in the country. The facilities include specialist and teaching

hospitals, and federal medical centres. They are equipped with high technology for special health

services and serve as resource centres for knowledge generation.

The health status in Nigeria is ranked low among other developing country in the same category.

Life expectancy is put at 52 years in 2011(according to World Bank) and crude death rate, in that

same year as 14%.

It is estimated that 124 out of 1000 new births do not survive beyond age 5. Only 39.56% of

male and 42.25% of female survive up to the age of 65 years. There are close to 3 million adults

(ages 15-49) living with HIV. While the estimated HIV/AIDS prevalence rate is 3.7. Nigeria has

large stock of health workers that is comparable to that of Egypt and South Africa. However,

births attended by skilled health personnel are estimated at 39 percent of total birth.

The expenditure pattern shows that only few amounts are spent on health in Nigeria. In 1997,

4.6% of gross domestic product (GDP) is accounted to have been spent on health care. The figure

rose to 6.6% in 2005 and latter fell to 5.8 in 2009. The actual total expenditure for 1997, 2001,
 21

2005 and 2009 stood at 134,522, 256,283, 972,921 and 1,596,573 (in million naira),

respectively. The figure is an indication of poor commitment of the nation to improved health

provisions and deliveries. In the total expenditure on health (THE), the available data shows that

out of pocket expenditure constitutes higher proportion. Public expenditure on health (PHE) was

36.7% of the total health expenditure in 2011. While out of pocket expenditure accounts for

60.4% of the total expenditure.

2.2 Theoretical Framework

2.2.1 Adolph Wagner’s law of “increasing expansion of public and state activities”

Adolph Wagner’s law of “increasing expansion of public and state activities” postulates that as

real income increases, there is a long-run tendency for the share of public expenditure to increase

relative to national income (Wagner, 1883). Wagner's law, known as the law of increasing state

spending, is a principle named after the German economist Adolph Wagner (1835–1917).He first

observed it for his own country and then for other countries. The theory holds that for any

country, that public expenditure rises constantly as income growth expands. The law predicts

that the development of an industrial economy will be accompanied by an increased share of

public expenditure in gross national product:

The advent of modern industrial society will result in increasing political pressure for social

progress and increased allowance for social consideration by industry. Wagner’s law suggests

that a welfare state evolves from free market capitalism due to the population voting for ever-

increasing social services as general income levels grow across broad spectrums of the economy.

In spite of some ambiguity, Wagner's statement in formal terms has been interpreted by Richard

Musgrave as follows:
 22

As progressive nations industrialize, the share of the public sector in the national economy grows

continually. The increase in State Expenditure is needed because of three main reasons. Wagner

himself identified these as (i) social activities of the state, (ii) administrative and protective

actions, and (iii) welfare functions. The material below is an apparently much more generous

interpretation of Wagner's original premise.

 Socio-political, i.e., the state social functions expand over time: retirement insurance, natural

disaster aid (either internal or external), environmental protection programs, etc.

 Economic: science and technology advance, consequently there is an increase of state

assignments into the sciences, technology and various investment projects, etc.

 Historical: the state resorts to government loans for covering contingencies, and thus the sum

of government debt and interest amount grow; i.e., it is an increase in debt service expenditure.

2.2.2 Peacock Wiseman Hypothesis

Peacock and Jack Wiseman advanced the study of growth of public expenditure through

Peacock Wiseman Hypothesis by their study of public expenditure at Great Britain during the

period 1890 to 1955.Peacock Wiseman Hypothesis focused on the pattern of public expenditure

and stated that public expenditure does not follow a smooth or continuous trend but the increase

in public expenditure takes place in jerks or steps. They gave three separate concepts to justify

the hypothesis, they are:

 Displacement Effect

 Inspection Effect

 Concentration effect
 23

According to Peacock Wiseman Hypothesis, due to some social or other disturbance in an

economy there is a need for increased expenditure as the existing public revenue cannot solve the

disturbance. The fiscal activities of the government rise step by step to successive new higher

level during the span of decades to meet successive social disturbances.

Displacement Effect

When a social disturbance occurs the government raises taxes to increase revenue and increases

public expenditure to meet the social disturbance.  This creates a displacement effect by which

low taxes and expenditures are replaced by higher tax and expenditure levels. However, after the

disturbance ends, the newly emerged level of tax tolerance makes the people willing to support

higher level of public expenditure since it is capable of bearing heavier tax burden than before.

As a result, the new level of public expenditure and public revenue stabilize but are soon

destabilized by another new disturbance which causes another displacement effect.

Inspection effect

Even if there is no new disturbance there is no strong motivation to return to lower level of

taxation as the increased revenue can be used to support a higher level of public expenditure. 

Therefore government expands its fiscal operations partly due to disturbance and partly to

expand economic activity and take up new functions that were earlier neglected. This is known

as Inspection effect.

Concentration effect
 24

When an economy is experiencing economic growth there is a tendency of central government`s

economic activities to grow at a faster rate than that of state and local government`s activities.

This is known as concentration effect. It is related to the political set up of the country.

2.2.3 Keynesian theory of Government expenditure as instrument of Fiscal policy

John Maynard Keynes was the first proponent of government expenditure as instrument of fiscal

policy in 1936 after when classicalist’s postulation stated that economy is regulated with the help

of market mechanism and there is no government intervention has failed and led to the great

depression of 1930. Keynesian (Modern Concept) view: this opines that Government must play a

positive role in order to regulate the economy by government spending and taxes in the most

desirable manner. This school of thought discredits the belief of classical that supply creates its

own demand and the automaticity of the economic system to generate full employment and

growth by itself without interference. Keynes believes that the propensity to consume reduces as

income increase and the propensity to save increase as income increase. This will bring about

disequilibrium in the economy as consumptions (aggregate demands) do not grow proportionally

with savings when income is rising. Thus, to maintain income, employment and growth it is

necessary to off-set the effects of reducing demand for outputs by a corresponding increase in

public expenditure. Hence, if undesirable economic conditions are to be avoided the gap between

the income and expenditure must be filled either by increasing propensity to consume in the

economy or by increasing government expenditure.

2.2.4 Relevance of the theory to the study

The Peacock Wiseman hypothesis of government spending trend is more convincing than in

Wagner`s hypothesis. The natural course of advancement and structural changes in an economy
 25

leads to constant and systematic expansion of public expenditure. An increase in public

expenditure can also be accredited to urbanization, population growth, and awareness of civil

rights, awareness of duties by the State government etc.

2.3 Empirical Review

The link between sectorial budget allocation management and GDP in Nigeria Health Sector has

attracted the attention of the researchers and scholars. The approaches of the examination of this

topic have been taking several dimensions by different scholars. However, this study focuses on

the effect of sectorial budget allocation management and GDP in Nigeria Health Sector. Let get

the contributions of scholar in different dimension.

2.3.1 Sectorial Budget Allocation Management and GDP in Nigeria Health Sector

Abada and Ugwunta, (2016) examined the effects of budgetary allocations on public sector

reform agenda in Nigeria. The data were presented and analyzed using trend analysis to show the

increases and decreases in data trend as well as interactions between variables. The findings

revealed that the Federal Government budgetary allocations to the health sector have a positive

but insignificant impact on life expectancy.

Idowu, (2014) conducted a study to examine the impacts of health on Economic growth in

Nigeria over a period of 1995 to 2009. The co-integration and Granger Causality techniques

were used in analysing Quarterly time series data. The study finds that GDP is positively

influenced by health indicators in the long run and health indicators cause the per capita GDP. It

reveals that health indicators have a long run impact on economic growth. Thus, the impact of

health is a long run phenomenon. The major policy implication of the study is that, a high level

of economic growth can be achieved by improving the health status of the populace.
 26

Odior (2011) examined the potential impact of increase in government expenditure on health in

Nigeria using an integrated sequential dynamic computable general equilibrium (CGE) model,

His result shows that the re-allocation of government expenditure to health sector is significant in

explaining economic growth in Nigeria. Thus, there is need for government to invest in health

services.

Uwubanmwen, and Osagie-Osifo (2016) examines effect of sector budgetary allocation on

economic development. The empirically examines the short-run and long-run relationships

between sectorial allocations to long sectors of the economy and economic development of

Nigeria. The study adopted multivariate OLS analysis for the estimation process, co-integration

analysis for long-run relationship and the associated error correction model to determine the

short-run impact of the variables. The Granger causality test was used to determine the direction

of causality among the variables. The findings of the study were that budgetary allocations to

education, health and agricultural sectors positively and significantly affect economic growth in

Nigeria and allocation to defence sector is negative.

Bello (2005) determines the relationship between deaths from malaria and public health and non-

health expenditure in Nigeria, the impact of malaria deaths on the economy and how much more

public expenditure is required to reduce deaths from malaria. Using the Filmer and Pritchet, and

the gross output transfer models. His study revealed that there is a negative relationship between

deaths from malaria, public health expenditure, per capital income and non-public health

expenditure, but a positive relationship between deaths from malaria and political instability. His
 27

study further found that an average of 5.86% of the GDP was lost malaria deaths annually,

between 1975 and 2001. Therefore, there is a need to increase public spending of the health

sector.

Odubunmi et al (2012) examined the relationship between health care expenditure and economic

growth in Nigeria for the period 1970-2009. They employed the multivariate co-integration

technique proposed by Johansen and found the existence of at least one co-integrating vector

describing a long run relationship among economic growth, foreign aids, health expenditure,

total saving and population. The co-integrating equation however shows some deviations in

terms of the signs of the coefficients of foreign aids and health expenditure which they attributed

to some diversification of foreign aids to other uses or inadequate allocation to health services .

Riman and Akpan (2010) investigate the causal direction and long run relationship between

government health expenditure, poverty and health status, in Nigeria shows the existence of a

long-run relationship between poverty and health status. However, they found non- significant

long-run relationshipbetween health status and government health expenditure. They concludes

that policies that would improve health status should be such as would promote adult literacy

level, reduce the poverty and income disparity since, increasing budgetary allocation to funding

health sector alone without reducing poverty level, would not sufficient to improve the health

status of the country.

Yaqub et al (2013) investigate the impact of public health spending on infant and under-

mortalities as well as life expectancy. Using the two-stage-least squares in addition to the
 28

ordinary least squares techniques, because of the possibility of reverse causality, revealed that

public health expenditure has negative effect on infant mortality and under-5 mortalities when

the governance indicators are included, with a reversed signs without the governance indicators.

They argued that as the level of corruption goes down and value of the corruption perception

index rises, there is an improvement in health status since infant and under-5 mortalities decline

and life expectancy rises. Thus, simply increasing public expenditure on health is less likely to

lead to improvement in health status unless corruption issue is addressed.

Mehrara and Musai (2011), examine the causal relationship between the health expenditure and

the GDP in a panel of 11 sampled oil exporting countries by using panel unit root tests and panel

co-integration analysis. They used a three variable model with oil revenues as the third variable.

Their results show a strong causality from oil revenues and economic growth to health

expenditure in the oil exporting countries. While health spending does not have any significant

effects on GDP in short- and long-run. Their findings show high vulnerability of oil dependent

countries to oil revenues volatility.

Rivera and Currais (2003) analyze the effect of health investment on productivity as an important

variable associated with human capital accumulation. Using descriptive survey method, the

authors reported a positive relationship between health expenditure and income growth.

Furthermore, while looking at the bounded gains of health status, the authors divided the sample

according to the median of total health expenditure and found that the countries with lower levels

of health spending obtain larger benefits when other determinants of growth are held constant.
 29

Bloom et al (2001) extend production function models of economic growth to account for two

additional variables identified as fundamental components of human capital: work experience

and health. The main finding show that good health has a positive, sizable, and statistically

significant effect on aggregate output, with a little variation across countries in average work

experience, thus differentials in work experience account for little variation in rates of economic

growth. Their reports further indicate that the effects of average schooling on national output are

consistent with microeconomic estimates of the effects of individual schooling on earnings,

suggesting that education creates no discernible externalities.

Abada and Ugwunta, (2016) examine the effects of budgetary allocations on public sector reform

agenda in Nigeria. The data were presented and analyzed using trend analysis to show the

increases and decreases in data trend as well as interactions between variables. The findings

revealed that the Federal Government budgetary allocations to the health sector have a positive

but insignificant impact on life expectancy. Conclusion was drawn and it was recommended

based on the findings of the study among others that the Federal Government should continue

with the implementation of the public sector reform program but should strengthen the audit

institutions to be able to carry out the responsibilities which the reform of public sector demands.

Akram et al (2011) investigate the impacts of different health indicators on Economic growth in

Pakistan, employs the Co-integration, Error Correction and Granger Causality techniques on the

time series data of Pakistan for the period of 1972-2006. They find that Per capita GDP is

positively influenced by health indicators in the long run and health indicators cause the per

capita GDP. However, in the short run the health indicators fail to put significant impact on per
 30

capita GDP. This suggests that impact of health is only a long run phenomenon and in the short

run there is no significant relationship between health variables and economic growth.

Badri and Badri (2016) examine effect of health spending on economic growth in 24 selected

countries of OECD in the period 2006-2013 using GMM methods. The results show that health

spending has a significant and positive effect on economic growth, so that an increase of1

percent of its value, economic growth 0/04 percent increased. Also, physical capital and the

working population have a significant positive effect on economic growth. However, inflation

has a negative effect on economic growth, as inflation increased the rate of economic growth

decreased.

Atari and Mousa (2017) examine the impact of the development of the health sector on economic

growth in Palestine over a period of 1997 to 2015, through investigated the causality and co-

integration relationships between health expenditure and GDP per capita. The result of co-

integration showed the existence of a long-term relationship between economic growth and

spending on health. Granger casualty test indicate there only unidirectional relationship from

economic growth to health expenditure in long and short run, but no casualty from health

expenditure to economic growth, the study found the lack impact from health on economic

growth.

Babatunde, (2014) examine causal relationship between health expenditure and economic growth

over a period of 1970– 2010.Multiple regression analysis was employed and the result shows

that gross capital formation, total health expenditures and the labour force productivity are

important determinants of economic growth in Nigeria while life expectancy rate has negative
 31

impact on growth for the period covered by the study. As a result, the following policy measures

are suggested among others that government should encourage savings and investments in the

economy, increase expenditures on health provisions, induce the level of labour productivity and

place priority on the issues of security to lives and properties in Nigeria.

Akintunde and Satope (2013) investigate the effect of health investment on economic growth in

Nigeria, from 1977 to 2010. Using the vector error correction model, the study finds that there is

a long run relationship between health expenditure and economic growth. The results from the

study also reveal a positive relationship between health expenditure and economic growth in

Nigeria. However, the results from the vector error correction model showed that in the short

run, the impact of health expenditure on the economic growth did not converge to the long run

growth. Investment in health boosts economic growth, if government invests more in this aspect

of human capital.

Olarinde and Bello, (2014) investigate and explain the impact of government healthcare

expenditure and health sector outcome. The analysis employs the use of annual data for the

sample period from 1970 to 2011. The autoregressive distributed lag (ARDL) and VECM

granger non-causality techniques were used for estimating the long-run and short run coefficients

of the health sector model as well as to confirm direction of causality between the variables. The

empirical results from ARDL bound testing approach provide strong evidence of the existence of

a long-run and short- run stable relationship among the variables included in both models. In

addition, the study verify that good institutions are germane to positive health sector outcome,

and that causality runs from all the variables in the model to infant mortality rate. This is an
 32

important finding for the achievement of healthy human capital necessary for a sustainable

economic development in Nigeria.

Fatima, ET al (2014) investigates the causality and co-integration relationships between public

spending on health and economic growth in Algeria during 1974-2014 using annual data. This

paper concentrated on time series co-integration and causality in ECM framework. The findings

revealed that there is a long-run causality from public spending on health to economic growth

while it is not observed any short-run causality from public spending on health to economic

growth. The lack of strong link from public spending on health to economic growth is not

necessarily a reason to reallocate health investment away from the health sector. The

improvements in health status will be worth the effort even if they turn out to have little effect on

growth.

Ahmed-Yusuf and Yakubu, (2017) examine the effects of defence and health expenditures on

Economic growth in Nigeria over a period of 1970 to 2015. The Error Correction Mechanism

(ECM) and Granger Causality methods were methods of analysis used in the estimation of the

models. Among other findings, the result of the ECM model shows that defence spending has

positive and statistically significant impact on the Nigerian economy in the short run. Health

spending also has positive and significant short run impact on the economy. The labour force

however did not have any significant impact on the gross domestic product. The Granger

causality result also revealed a unidirectional causality running from DSP to GDP but not the

other way round. Also, there exists a one-directional causal relationship between GDP and health

spending in Nigeria. The result shows causality running from health spending to GDP but not the

other way round.

 33

Udeorah, Obayori and Onuchuku, (2018) examine the impact of health care expenditure on

economic growth in Nigeria for the period of 1980 to 2016. The study used descriptive statistics

and Generalized Method of Moments (GMM) test as the estimation techniques of data analysis.

The descriptive statistics result revealed that RGDP has an average of N31292.50billion; health

care expenditure has an average of N10322.47billion while education expenditure has an average

of N45895.95billion during the period of study. The GMM result revealed that the coefficient of

health care expenditure with positive sign which conformed to economics theory is not

statistically significant at 5% level. The coefficient of education expenditure conformed to

economics theory (i.e. positive) and statistically significant at 5% level. The study concluded that

health care expenditure had no significant impact on economic growth while education

expenditure had positive significant impact on economic growth in Nigeria during the period of

study.

Abu-Bader and Abu-Qarn (2003) employed multivariate co-integration and variance

decomposition approach to examine the causal relationship between government expenditures

and economic growth for Egypt, Israel, and Syria. In the bivariate framework, the authors

observed a bi-directional (feedback) and long run negative relationships between government

spending and economic growth. Moreover, the causality test within the trivariate framework (that

include share of government civilian expenditures in GDP, military burden, and economic

growth) illustrated that military burden has a negative impact on economic growth in althea

countries. Furthermore, civilian government expenditures have positive effect on economic

growth for both Israel and Egypt.

 34

Loizides and Vamvoukas (2005) employed the trivariate causality test to examine the

relationship between government expenditure and economic growth, using data set on Greece,

United Kingdom and Ireland. The authors found that government size granger causes economic

growth in all the countries they studied. The finding was true for Ireland and the United

Kingdom both in the long run and short run. The results also indicated that economic growth

granger causes public expenditure for Greece and United Kingdom, when inflation is included.

Komain and Brahmasrene (2007) examined the association between government expenditures

and economic growth in Thailand, by employing the Granger Causality Test. The results

revealed that government expenditures and economic growth are not co integrated. Moreover,

the results indicated a unidirectional relationship, as causality runs from government

expenditures to growth. Lastly, the results illustrated a significant positive effect of government

spending on economic growth.

Olugbenga and Owoye (2007) investigated the relationships between government expenditure

and economic growth for a group of 30 OECD countries during the period 1970-2005. The

regression results showed the existence of a long-run relationship between government

expenditure and economic growth. In addition, the authors observed a unidirectional causality

from government expenditure to growth for 16 out of the countries, thus supporting the

Keynesian hypothesis. However, causality runs from economic growth to government

expenditure in 10 out of the countries, confirming the Wagner’s law. Finally, the authors found

the existence of feedback relationship between government expenditure and economic growth

for a group of four countries.

 35

Liu, Hsu and Younis (2008) examined the causal relationship between GDP and public

expenditure for the US data during the period 1947-2002. The causality results revealed that total

government expenditure causes growth of GDP. On the other hand, growth of GDP does not

cause expansion of government expenditure. Moreover, the estimation results indicated that

public expenditure raises the US economic growth. The authors concluded that, judging from the

causality test Keynesian hypothesis exerts more influence than the Wagner’s law in US.

Loizides and Vamvoukas (2005) employed the trivariate causality test to examine the

relationshipbetween government expenditure and economic growth, using data set on Greece,

United Kingdom and Ireland. The authors found that government size granger causes economic

growth in all the countries they studied. The finding was true for Ireland and the United

Kingdom both in the long run and short run. The results also indicated that economic growth

granger causes public expenditure for Greece and United Kingdom, when inflation is included.

A Disaggregated Analysis was carried out by Abu and Abdullahi (2010), using the co-integration

and error correction methods, the study has its basis on the Keynesian and endogenous growth

models. The result reveals that government total capital expenditure, total recurrent expenditure

and government expenditure on education have negative effect on economic growth while,

government expenditure on transport and communication and government expenditure on health

result to an increase in economic growth.

 36

Adesoye, et al (2010) investigated dynamic analysis of government Spending and economic

growth in Nigeria used time series data covering 1977-2006 to analyse the RAM model. The

study employed three variants of Ram model were developed to regressed Real GDP on private

investment. The empirical result showed that private and public investments have no significant

effect on economic growth. However, the study shows that long run relationship between public

expenditure and economic growth.

Usman, et al (2011) empirically examined the public expenditure and economic growth in

Nigeria. The study adopted augmented Solow model is specified in Cobb-Douglas. The study

focuses on sectorial government expenditure which are decomposed to three streams;

expenditure on building human capital- public expenditure on education and health, expenditure

on building infrastructure-public expenditure on transport and communication, and other social

services, and expenditure on administration to study the impact government expenditure on

economic growth. The result shows that public spending doesn’t has impact on growth in the

short run, however there is long run relationship between public expenditure and economic

growth.

Ehigiamusoe (2012) in his study titled ‘A comparative Analysis of Agricultural Performance

between the Military and Civilian Regime in Nigeria’ the papers adopt descriptive approach in

its study. The research work compares the proportion of public expenditure on agricultural with

the allocation to other sectors of the economy such as education, health and transport. The study

reveals the agricultural sector received more percentage of public expenditure during civilian
 37

regime but the contribution of agriculture to GDP during military regime is greater than the

civilian regime.

Adewara and Oloni, (2012) in Composition of Public Expenditure and Economic Growth in

Nigeria analyzed the relationship between public expenditure compositions from 1960 to 2008

on economic growth using the Vector Autoregressive Model (VAR). The study finds out that

expenditure on education has failed to enhance economic growth due to the high rate of rent

seeking in the country and high rate of unemployment. The study also recommends that

expenditure on health and agriculture should be encouraged due to their positive contributions to

growth.

Ben-Caleb and Godwins (2012) researched on Budget discipline in Nigeria: A critical evaluation

of military and civilian regimes. The paper juxtaposes military and civilian regimes with respect

to adherence to budgetary estimates. The study employs descriptive statistics, simple variances

and percentages with the help of independent T-test of difference of variances. The paper reveals

that budget indiscipline under democratic regime is higher than the budget indiscipline under

democratic regime by analyzing budget expenditure variances between the two regimes.

Anyanwu et al (2012) in their Comparative Regime Analysis of the Trend and Structure of

Military Expenditure in Nigeria, the study covers from 1980 to 2010 where the descriptive

statistical tool employed in the analysis ironically shows civilian administrations spend more for

defence purposes than military and that recurrent defence expenditure takes a higher proportion

of total allocation for defence in Nigeria.

 38

Ebiringa and Chalse-Anyaogu (2012) investigated the Impact of Government Sectorial

Expenditure on the Economic Growth of Nigeria. He opined that government expenditures

remain the bedrock of Nigeria’s economic growth. The work adopted the ECM method to

analyse the long run effect of selected macro economic variables on growth. The findings of their

work shows that expenditure on telecommunication, defence and security, education and health

sectors have positive effect on Nigeria economic growth. But, transportation and agricultural

expenditures have impacted negatively on the economic growth.

Ogbulu and Torbira (2012) carried out empirical study on Budgetary Operations and Economic

Growth: The Nigerian Perspective. The study adopted the linear OLS mechanism in the analysis

of budgetary economic growth model patterned after multivariate regression model of linear

formation. The ECM was used to indicate how the departure from the long-run equilibrium is

corrected. The study reveals that five budgetary items: non-oil revenue, economic,

administrative, social and transfer expenditures exerted a significant effect on the GDP.

Nworji et al (2012) worked on the Effects of Public Expenditure on Economic Growth in

Nigeria: An Disaggregated Time Series Analysis from 1970-2009. The study use the OLS

multiple regression model. The result of the analysis shows that capital and recurrent expenditure

on economic services have insignificant negative effect on economic growth; capital expenditure

has insignificant positive effect on growth. While capital and recurrent expenditure on social and

community services and recurrent expenditure on transfers has significant positive effect on

economic growth.
 39

Chude and Chude (2013) examine the Impact of Government Expenditure on Economic Growth

in Nigeria between the periods of 1977 to 2012. The study focuses on the sectorial expenditures

analysis. The study employed ex post-facto design and Error Correction Model in its analysis.

The study reveals that total expenditure education is highly and statistically significant and has

positive relationship on economic growth in Nigeria in the long run.

Oyinlola and Olusijibomi (2013) investigated public expenditure and economic growth nexus:

Further evidence from Nigeria during the period of 1970 to 2009. The study employed

disaggregated public expenditure using the structural breaks co-integration technique. The result

of the research confirms Wagner’s law in two models in the long run, the result also shows that

economic growth and development are the main objectives of government expenditure,

especially investment in infrastructure and human resources all of which falls under social and

community services.

Egbetunde and Fasanya (2013) delve into the Public Expenditure and economic Growth in

Nigeria: Evidence from Auto-Regressive Distributed Lag Specification during the period 1970-

2010. The Bounds approach to co-integration was used in the analysis to examine the long run

and short run relationships between public expenditures and economic growth. The ARDL

approach signifies that the variables are bound together in the long-run. The study reveals that

recurrent expenditure has significant impact on growth; total public spending has negative effect

on growth.
 40

Okoro (2013) explores Government Spending and Economic Growth in Nigeria covering 1980 to

2011. The study used Error correction mechanism and Granger causality test in its analysis. The

findings reveal that there exist a long run equilibrium relationship between government spending

and economic growth in Nigeria.

Nazifi (2014) researched on the capital expenditure and its impact on economic growth in

Nigeria: 1980-2010.The multiple regression model of Ordinary Least Square was used to analyse

the data. The findings of the study shows that total capital expenditure, capital expenditure on

administration, capital expenditure on social community services and capital expenditure on

transfers have positive impact on economic growth in Nigeria.

Akpan (2005) used a disaggregated approach to determine the components (that include capital,

recurrent, administrative, economic service, social and community service, and transfers) of

government expenditure that enhances growth, and those that do not. The author concluded that

there was no significant association between most components of government expenditure and

economic growth in Nigeria.

Ighodaro and Okiakhi (2010) used time series data for the period 1961 to 2007 and applied co-

integration Test and Granger Causality test to examine government expenditure disaggregated

into general administration and community and social services in Nigeria. The results revealed

negative impact of government expenditure on economic growth.

 41

Loto (2011) investigated the impact of sectorial government expenditure on economic growth in

Nigeria for the period 1980-2008 and applied Johansen co-integration technique and error

correction model. The results inferred that in the short run expenditures on agricultures and

education were negatively related to economic growth. However, expenditures on health,

national security, transportation, and communication were positively related to economic growth,

though the impacts were not statistically significant.

Studies in Nigeria, like Nurudeen and Usman (2010) showed mixed results. Therefore, this study

is an improvement on the previous studies on economic growth and government expenditure

relationship in Nigeria. It considers government spending only in two categories – capital and

recurrent expenditure as important variables that affects economic growth. Secondly, it extends

the study period to 2011 and finally employed the Error Correction Mechanism (ECM) in the

study.

2.4 Summary Literature

Budgetary allocations are integral components to an annual financial plan, or budget, of all

organizations. Sectorial Budgetary Allocation is a financial plan used to estimate revenues and

expenditures for a specific period of time on sectors of the economy such as education, health,

defence, transportation, communication etc. Sectorial Budgetary Allocation management is the

sharing formula designed by constituted authority on the amount of funding designated to each

sectors of the economy such as education, health, defence, transportation, communication for a

specific period of time.

 42

2.5 Literature Gap

After going through available literature of previous studies, to the best knowledge, there is no

study that covered effect of sectorial budget allocation management on GDP of Nigeria health

sector between the periods of 1990 to 2019 that has done in recent time. The studies in the past

fail to first use pre-diagnostic test to determine which statistical tool most suits the model

specification. The study will use sophisticated econometric estimation tool like error correction

model or autoregressive distributive lag model, or vector autoregressive VAR depending on

output of unit root test unlike past studies that used ordinary regression.

The literature so far reviewed reveals that there are still unanswered research questions such as

what is extent to which sectorial budget allocation management on GDP of Nigeria health sector.
 43

References

Abada, U. D and Ugwunta, O. D. (2016) Effects of Budgetary Allocations on Health Sector

Reform Agenda: Evidence From Nigerian Public Sector. Online Journal of Arts,
Management and Social Sciences (OJAMSS); Vol.1 No.1, September 2016, pg.1 - 11
(Maiden Edition)

Abada, U.D and O. D Ugwunta, (2016) the Effects of Budgetary Allocations on Health Sector
Reform Agenda: Evidence from Nigerian Public Sector Online Journal of Arts,
Management and Social Sciences (OJAMSS); Vol.1 No.1, September 2016, pg.1 - 11
(Maiden Edition)

Abu N. and Abdullahi U. (2010). Government Expenditure and Economic Growth in Nigeria,
1970-2008: A Disaggregated Analysis. Business and Economics Journal, Volume 2010:
BEJ-4.

Abu-bader, S. and A. Abu-Qarn (2003) Government Expenditures, Military Spending and

Economic Growth: Causality Evidence from Egypt, Israel and Syria. MPRA paper No.
1115.http://mpra.ub.unimuenchen. de/1115/

Adesoye A. B., Maku O. E. and Atanda A. A. (2010).Dynamic Analysis of Government

Spending and Economic Growth in Nigeria. Journal of Management and Society: Vol. 1,
No 2, pp. 27-37, December Edition 2010.

Adewara S. O. and Oloni E. F. (2012).Composition of Public Expenditure and Economic Growth

in Nigeria. Journal of Emerging Trends in Economics and Management Sciences
(JETEMS) 3(4): 403-407.

Ahmed-Yusuf, T. and Yakubu J.A. (2017). The effects of defence and health expenditures on
Economic growth in Nigeria. International Journal of Peace and Conflict Studies
(IJPCS), Vol. 4, No 2, December, 2017.

Akintunde, T.S. and Satope B. F. (2013) Effect of Health Investment on Economic Growth in
Nigeria IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-
ISSN: 2321-5925.Volume One.

Akpan, E. (2005) Local Government Expenditure, Basingstoke: Macmillan Press.

Al-Yousif Y. (2000) Does Government Expenditure Inhibit or Promote Economic Growth:
Empirical Evidence from Saudi Arabia. Indian Economic Journal, 48(2)

Anyanwu S., Egwaikhde C. and Aiyedogbon J. O. (2012). Comparative Regime Analysis of the
Trend and Structure of Military Expenditure in Nigeria, 1980-2010. Journal of African
Macroeconomic Review Vol. @, No. 1 (2012).

Ataguba J. E.O, Akazili J. (2010) “Healthcare financing in South Africa: moving towards
universal coverage” Continue Medical Education Vol 28, No 2. pp.74 -78
 44

Atari, S.S. and Mousa Y. (2017) The Impact of Health on Economic Growth in Palestine (1997-
2015) International Journal of Economics, Business and Management Research Vol. 1,
No. 05; 2017 ISSN: 2456-7760
Babatunde, O.L. (2014) Analysis of the Growth Impact of Health Expenditure in Nigeria. IOSR
Journal of Economics and Finance (IOSR-JEF) Volume 3, Issue 1. Ver. I (Feb. 2014), PP
77-84

Badri, A.K. and S.K Badri (2016) Health Spending and Economic Growth in Selected OECD
Countries American Journal of Clinical Neurology and Neurosurgery Vol. 2, No. 1,
2016, pp. 5-9

Bhatia H.L (2002). Public Finance, 25th Edition, Vikas Publishing House, PVT Ltd, India. CBN
(2013). “Statistical Bulletin”.www.cenbank.org.

Bhatia H.L (2002). Public Finance, 25th Edition, Vikas Publishing House, PVT Ltd, India.

Bloom, David; Canning, David and Sevilla, Jaypee (2001). “The Effects of Health on Economic
Growth: Theory and Evidence” NBER Working Paper No: 8587

CBN (2013). “Statistical Bulletin”.www.cenbank.org.

Chude N. P. and Chude D. I. (2013). Impact of Government Expenditure on Economic Growth

in Nigeria. International Journal of Business and Management Review: Vol.1, No.4,
pp.64-71, December 2013.

Ebiringa O. F. and Chalse-Anyaogu N. B. (2012). Impact of Government Sectorial Expenditure

on the Economy. International Journal of Business and Management Review: Vol.1,
No.4, pp.64-71, December 2012.

Fatima, B., Zina B. and Abdelaziz, T. (2014) The Relationship between public spending on
health and economic growth in Algeria: Testing for Co-integration and Causality
International Journal of Business and Management Vol. II (3), 2014

First Bank: Monthly Business and Economic Reports for 1988, 1989, 199, 1991, 1992, 1993
Idowu, D. O (2014). The Impact of Health on Economic Growth in Nigeria Journal of
Economics and Sustainable Development Vol.5, No.19, 2014

Ighodaro, C.A.U and Okiakhi, D.E. (2010): Does the Relationship between Government
Expenditure and Economic Growth Follow Wagner’s Law in Nigeria? Annals of
University of Petrosani Economics, Vol. 10(2), pp.185-198
Kabir A. Bashir (2008). The Mechanics of Revenue Allocation: Understanding the Need for
Effective Data Collection and Management, Workshop Paper.
 45

Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London:
Macmillan.

Loto, M. A. (2011): Impact of government Sectorial Expenditure on Economic Growth. Journal

of Economics and international Finance, Vol. 3(11), pp.646-652

Lukpata, V. I. (2013) Revenue Allocation Formulae in Nigeria: A Continuous Search.

International Journal of Public Administration and Management Research (IJPAMR),
Volume 2, Number 1, October, 2013.
Mordi N.O C, Abwaku E, Banji S. A (2010),”The Changing Structure of the Nigerian Economy”
Published by Research Department, CBN, 2010 Pp. 297.

Obinna, O. E. (2003) Public Finance, Nsukka, Ap and P Press Ltd. 210p

Odior, E. S. (2011). Government expenditure on health, economic growth and long waves in a
CGE microsimulation analysis: The case of Nigeria. European Journal of Economic,
Finance and Administrative Sciences, 31(1), 99-114.

Odubunmi, A. S., Saka, J.O., and Oke, M. D., (2012). Testing the Co integrating Relationship
between Health Care Expenditure and Economic Growth in Nigeria. International
Journal of Economics and Finance; Vol. 4, No. 11; 2012

Okoro A. S. (2013). Government Spending and Economic Growth in Nigeria (1980-2011).

Singaporean Journal of Business Economics, And Management Studies VOl.2, NO.5,
2013.

Olarinde, M.O, and A. A Bello (2014) Public Healthcare Expenditure and Health Sector
Performance in Nigeria: Implications for Sustainable Economic Development IOSR
Journal of Economics and Finance (IOSR-JEF) Volume 4, Issue 3. (May-Jun. 2014), PP
39-55.

Olugbenga A. O, Owoye O, (2007), Public Expenditure and Economic Growth, New Evidence
from OECD Countries.

Peacock, A.T., Scott, A. (2000). The curious attraction of Wagner’s law. Public Choice, 102(1-
2), 1-17.

Peacock, A.T., Wiseman, J. (1961). The Growth of Public Expenditure in the United Kingdom,
London: Oxford University Press.

Peacock, A.T., Wiseman, J. (1979), Approaches to the analysis of Government expenditure

growth. Public Finance Quarterly, 7, 3-23.
 46

Riman Hodo Bassey (2012) “Healthcare Financing and Health outcomes in Nigeria: A State
Level Study using Multivariate Analysis” International Journal of Humanities and Social
Science vol. 2, No 15 Pp.296-305
Rivera, B. and Currais. L., (2009).The Effect of Health Investment on Growth: A Causality
Analysis. International Advances in Econ. Res., 9(4): pp. 312-323, Nov. 03.

Ryckman, L. M. (2019) What Is a Budgetary Allocation? BlogSpot

Nov. https://smallbusiness.chron.com/budgetary-allocation-31340.html

Udeorah, S. A., Obayori, J. B. and Onuchuku, O. (2018) Health Care Expenditure and Economic
Growth in Nigeria. International Journal of Research and Innovation in Social Science
(IJRISS) Volume II, Issue III, March 2018

Usman A., Mobolaji H., Kilishi A., Yaru M. and Yakubu T. (2011).Public Expenditure and
Economic Growth in Nigeria. Asian Economic and Financial Review, 1(3), pp. 104-113.

Uwubanmwen, A.E. and Osagie-Osifo (2016) Analysis of Sectorial Budgetary Allocation and
Economic Development in Nigeria Sokoto Journal of the Social Sciences Vol. 6: No.2,
December, 2016 ISNN: Print 1595-2738, Online 2384-7654 2

Wagner, A.H. (1883), Finanzwissenschaft. Leipzig: C. F. Winter.

WHO, (2019). Budgeting for Health: Strategizing National Health in the 21 st Century: A
Handbook. World health Organization.

World Bank. (1993), World Development Report 1993: Investing in Health. Oxford University
Press: New York, NY. World Bank. (1993), World Development Report 1993: Investing in
Health. Oxford

Yaqub, J., Ojapinwa T.V. Yussuff R.O (2010) “Public Health Expenditure and Health Outcome
in Nigeria: The Impact of Governance” European Scientific Journal vol. 8, No.13 PP.189
-201

Yusuf S. A. (2014): The Analysis of Export Performance of NICs: A Lesson for African
Countries. http://mpra.ub.uni-muechen.de/55110.html

Yusuf S. A. (2014): The Analysis of Impact of Investment in Education on Economic Growth in

Nigeria: Veracity of Association of Staff Union of University of Nigeria’s Agitation:
http://mpra.ub.unimuechen. de/55524

Yusuf, S.E, Babalola, B.T.A ,Aninkan O. D. and Salako M. A. (2015). Analysis of Impact of
Sectorial Government Expenditures on Economic Growth in Nigeria: Bound Test Co-
integration Approach European Journal of Business and Management
www.iiste.orgVol.7, No.12, 2015
 47

CHAPTER THREE
METHODOLOGY

3.1 Introduction

This chapter aimed at stipulating steps of the research designs for the study. It encompassed the

research design used for the research. It addressed the target population, research design,

sampling procedure, research techniques, data collection and data analysis methods.

3.1 Area of Study

Nigeria officially referred to as the Federal Republic of Nigeria is a federal state in West Africa.

It borders Cameroon and Chad to the East, Benin to the west and Niger to the north. It also has a

coast in the south that lies on the Gulf of Guinea in the Atlantic Ocean. Nigeria is made up of 36

cities and the Federal Capital Territory, where Abuja, the capital city is situated.

Nigeria has a lot of historic empires and cultures compared to other countries in Africa. The

history of Nigeria can be traced back to as early as 11,000 BC when a number of ancient African

communities inhabited the area that now makes Nigeria. The greatest and the well-known empire
 48

that ruled the region before the British arrived was the Benin Empire whose ruler was known as

Oba of Benin. Other tribes such as the Nri Kingdom also settled in the country, especially in the

Eastern side. The Songhai Empire also settled in some of the country’s territory. By the 11th

century, Islam had arrived in Nigeria via the Hausa States. In 1851, the British forces seized

Lagos, which was later annexed officially in 1861. In 1901, Nigeria was made a British

protectorate and was colonized until 1960, when the country gained independence.

In 1963, Nigeria became a republic but fell under military rule in 1966 as a result of a coup

d'état. In 1967, the Republic of Biafra was formed and this led to the three-year Nigerian Civil

War. The country became a republic again in 1979 after a new constitution was drafted. The

republic, however, did not last for long because the military under the leadership of Major

General Muhammadu Buhari seized the country four years later. A new republic was formed in

August 1993 after Buhari was overthrown but was once again dissolved in November the same

year by General Sani Abacha who passed on in 1998, leading to the creation of a forth republic

in 1999.

3.2 Research Design

This study made use of ex post-facto research design which enables us to measure the effect or

relationship between dependence variable and explanatory variables using time-series secondary

data. An ex post facto research design is a method in which groups with qualities that already

exist are compared on some dependent variable. Also known as "after the fact" research, an ex

post facto design is considered quasi-experimental because the subjects are not randomly

assigned - they are grouped based on a particular characteristic or trait (Ebo, 2009). 

3.3 Sources of Data

 49

The sources of data are obtained from the central Bank of Nigeria statistical Bulletin, the

National Bureau of statistics and budget office federal ministry of finance. The type of data is

secondary annual time series data.

3.4 Population the Study

The population of the study constitutes Nigeria as a whole, because they are data on the sectorial

budget allocation to education, defence, agriculture and transportation and communication

covering a period of 1985 to 2018 using time-series secondary data. The population of the study

involves Nigeria time series data for 33 years.

3.5 Sample Determination and Sampling Techniques

Since this study is based on time series form secondary data, the sample size is 29 years within

the range of 1990 to 2019. This duration was used because it is detailed enough to give a good

result and analysis. Again, the scope of the study was chosen to concentrate mainly on time

series data.

3.6 Model Specification

The study is anchored on Adolph Wagner’s law of “increasing expansion of public and state

activities” postulated that increase in public expenditure comes as a result of increase in

economic activities.

Thus, the model is represented in a functional form of the model was shown below:

GDP = F (EDU, HEALTH, DEFENCE, AGRIC, TRAN) ………………………….. (eqn1)

Where
 50

GDP = Health Sector Gross Domestic Product (Dependent variable)

EDU = Sectorial Budget allocation to Education sector (Independent variable)

HEALTH = Sectorial Budget allocation to Health sector (Independent variable)

AGRIC = Sectorial Budget allocation to Agriculture sector (Independent variable)

DEFFENSE = Sectorial Budget allocation to Defence sector (Independent variable)

TRANS = Sectorial Budget allocation to Transportation sector (Independent variable)

In a linear function, it is represented as follows:

GDP = β0 + β1EDU + β2HEALTH + β3DEFENCE + β4 AGRIC + β5TRANS +Ut……Eqn2

Where: β0 = Constant term, β1 to β5 = Regression coefficient and Ut = Error Term.

3.6 Method of data Analysis

The ordinary least square (OLS) method of estimate will be employed in the study. This is

because of the various assumptions of the classical least square estimation are showed in the

qualities of the variables. The OLS has best linear unbiased estimator (BLUE). Therefore, the

BLUE are efficient, consistent, sufficient and unbiased estimators.

3.7 Estimation Procedure

Before the estimation exercise, all variables will be tested with Augmented Dickey Fuller unit

root test because any non stationary time series data produce spurious regression and it also stand

to eliminate the present of Autocorrelation problem in the model.

3.8 Techniques for Evaluation

 51

The result emanating from the model shall be evaluated based on the following criterion:

Economic, Statistical, Econometric criterion

 Economic Criterion

This involves examining the result of the estimated model with a view to finding out whether the

estimated parameters meet the economic a priori expectation or conform to the theory. All

variables used in the model specification have positive sign because they have direct relationship

with Nigeria Health sector GDP.

 Statistical Criterion

This confirms the significance of the a priori expectation. Most common among them are student

t-test, f-ratio test, the standard error, R-square and adjusted R-square. The student t-statistic

shows how the individual explanatory variables employed in the study are significant in

explaining the dependent variable, the F-ratio statistics shows significant of the entire variable

joined together in explaining the dependent variable. The R-square shows the overall goodness

of fit of the model. It tells the percentage of the dependent variable that has been explained by

the explanatory variables taken together.

 Econometric Criterion

Residual Normality test:-This test whether the residuals are normally distributed. A good result

of this test shows that the model is well specified and the test statistics can produce neither type

one error nor type two errors. Jarque-Bera statistics is test statistics that shows both skewness

coefficient and Kurtosis coefficient. When the Jarque-Bera test statistic produces result zero for

skewness and 3 (three) for Kurtosis respectively, it means that the residual of the model is

normal distributed and able to give good value judge on the model.
 52

Autocorrelation Test:-The Durbin-Watson (D-W) statistics is test statistics that check whether

the model suffers autocorrelation problem. The present of Autocorrelation problem violates the

assumption of ordinary least square method.

3.9 Computer Application Device

This study will employ e-veiws version 9 computer application software. They are user friendly

computer application software that handles time-series data more efficiently.

 53

References

Anyanwu A. (2000); Research Methodology in Business and Social Science Research: A

methodological Guide for Student, Enugu: ABIC Publishers.
Chukwuemeka E.E.O. (2002) Research Methods and Thesis Writing: A Multi-Disciplinary
Approach: Enugu Hope Rising Venture.
Eboh E.C. (2009), Social and Economic Research Principles and Methods; Enugu African Institute
for Applied Economic.
Ogum, G.E.O (2009) Testing For Significant Differences. A Step-By-Step Guide to Students and
Researchers. Awka: Abimac Publishers.
Onodugo, V. E, Ugwuonah, G.E and Ebinne, E.S (2010) Social Science Research: Principles.
Methods and Applications. Enugu: Eldemark Publishers.
Uzoagulu A.E. (1998) Practical Guide to Writing Research Project Reports in Tertiary Institutions;
Enugu: John Jacob Classic Publishers Ltd.
Yin, R. K. (2002), “Case Study Research, Design and Methods”, 3rd ed. Newbury Park: Sage
Publications
Yomere, G.O., and Agbonifoh, B.A. (1999), “Research Methodology in the Social Sciences and
Education, Benin City: Centre Consultants Nigeria Limited.
54