This study examines the effect of recurrent and capital government health expenditure on health service delivery in Nigeria over the period 1990 to 2025. Despite successive policy reforms and incremental increases in nominal health budget allocations, Nigeria continues to record persistently poor health outcomes including a life expectancy of approximately 54.6 years, one of the world's highest maternal mortality ratios, and chronic shortfalls against the African Union Abuja Declaration's 15 percent health budget benchmark. A central but underexplored dimension of this challenge is the structural composition of public health spending, characterised by the overwhelming dominance of recurrent expenditure (averaging 45.2% of total government health spending) over capital investment (averaging only 3.54%).
Anchored in the Grossman health capital demand model and human capital theory, the study employs the Autoregressive Distributed Lag (ARDL) Bounds Testing approach within an Error Correction Model (ECM) framework using annual time series data sourced from the World Bank World Development Indicators and the Central Bank of Nigeria Statistical Bulletin. Health service delivery is proxied by life expectancy at birth, with recurrent health expenditure (RHE) and capital health expenditure (CHE) as primary explanatory variables, supplemented by real GDP per capita, inflation rate, and urban population share as controls.
Pre-estimation Augmented Dickey-Fuller (ADF) unit root tests confirmed a mix of I(0) and I(1) series with no I(2) variables satisfying the ARDL precondition. The ARDL Bounds Test yielded an F-statistic of 5.7182 (p = 0.00144), exceeding the 1% upper critical bound and confirming a robust long-run cointegrating relationship among the study variables. Long-run estimation results show that both recurrent health expenditure (β = 0.1245, p < 0.05) and capital health expenditure (β = 0.1876, p < 0.01) exert positive and statistically significant effects on health service delivery. Crucially, capital expenditure generates a larger long-run return approximately 51% higher than the recurrent expenditure elasticity directly challenging Nigeria's recurrent-dominated budget structure.
Table of Contents
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Significance of the Study
1.6 Scope of the Study
1.7 Organisation of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Conceptual Clarifications
2.2.1 The Concept of Health Expenditure
2.2.2 The Concept of Health Service Delivery
2.2.3 Health Service Delivery in Nigeria: An Overview
2.3 Theoretical Literature
2.3.1 The Human Capital Theory
2.3.2 Wagner's Law of Increasing State Activities
2.3.3 The Public Goods Theory
2.3.4 The Grossman Model of Health Demand
2.4 Empirical Literature
2.4.1 Recurrent Health Expenditure and Health Service Delivery
2.4.2 Capital Health Expenditure and Health Service Delivery
2.4.3 Joint Effects of Recurrent and Capital Health Expenditure
2.4.4 Summary of Empirical Findings and Research Gaps
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Theoretical Framework
3.3 Model Specification
3.3.1 The ARDL Bounds Testing Approach: Justification
3.3.2 Variable Definition and Measurement
3.3.3 The ARDL Long-Run Level Model
3.3.4 The ARDL Bounds Testing Equation
3.3.5 The Error Correction Model (ECM)
3.4 Pre-Estimation Tests: Unit Root Analysis
3.5 Optimal Lag Length Selection
3.6 Post-Estimation Diagnostic and Stability Tests
3.7 Sources and Nature of Data
3.8 Estimation Software
CHAPTER FOUR: RESULTS AND DISCUSSION
4.1 Introduction
4.2 Descriptive Statistics
4.2.1 Interpretation of Descriptive Statistics
4.3 Trend Analysis
4.3.1 Health Service Delivery (Life Expectancy)
4.3.2 Recurrent Health Expenditure
4.3.3 Capital Health Expenditure
4.4 Correlation Analysis
4.5 Unit Root Tests
4.6 Cointegration Test: ARDL Bounds Test
4.7 Model Estimation Results
4.7.1 Long-Run ARDL Estimates
4.7.2 Short-Run Dynamics and Error Correction Model
4.8 Diagnostic Tests
4.9 Stability Tests: CUSUM and CUSUMSQ
4.10 Discussion of Findings
4.10.1 Effect of Recurrent Health Expenditure on Health Service Delivery
4.10.2 Effect of Capital Health Expenditure on Health Service Delivery
4.10.3 Comparison with Previous Studies
4.11 Policy Implications
4.12 Summary of Chapter Four
CHAPTER FIVE: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
5.1 Introduction
5.2 Summary of the Study
5.2.1 Statement of the Problem and Research Objectives
5.2.2 Methodology
5.2.3 Summary of Key Findings
5.3 Conclusions
5.3.1 Both Recurrent and Capital Health Expenditure Matter for Long-run Health Service Delivery
5.3.2 Capital Health Expenditure Generates Larger Long-run Returns than Recurrent Expenditure
5.3.3 Health Expenditure Effects Are Long-run Phenomena
5.3.4 Macroeconomic Stability Is a Prerequisite for Health System Performance
5.3.5 The Urban–Rural Health Divide Requires Targeted Capital Intervention
5.3.6 Parameter Stability Validates the Policy Relevance of the Findings
5.4 Policy Recommendations
5.4.1 Rebalance Government Health Expenditure Composition
5.4.2 Close the Capital Budget Implementation Gap
5.4.3 Reform Recurrent Health Expenditure for Greater Efficiency
5.4.4 Prioritise Rural Health Infrastructure as a Capital Investment Priority
5.4.5 Institutionalise Macroeconomic Stability as a Health Policy Objective
5.4.6 Strengthen Governance, Accountability, and Transparency in Health Public Financial Management
5.4.7 Scale Up Social Health Protection to Amplify Expenditure Returns
5.5 Limitations of the Study
5.6 Suggestions for Further Research
5.7 Contribution to Knowledge
5.8 Summary of Chapter Five
Research Objectives and Core Themes
The primary objective of this study is to empirically examine the influence of the structural composition of government health expenditure—specifically distinguishing between recurrent and capital spending—on the efficacy of health service delivery in Nigeria over the period 1990 to 2025.
- The differential long-run and short-run impacts of recurrent versus capital health spending on health outcomes.
- The role of recurrent expenditure as an operational maintenance investment versus capital expenditure as a long-term capacity augmentation investment.
- The structural and policy constraints, such as the persistent imbalance in expenditure composition and the significant capital budget implementation gap in Nigeria.
- The impact of macroeconomic factors, specifically inflation and urbanisation, on the effectiveness of health investment.
Excerpt from the Book
1.1 Background to the Study
Health expenditure is widely acknowledged in the economics literature as a fundamental determinant of the performance, accessibility, and long-term sustainability of healthcare systems, particularly in developing economies. It reflects the financial commitment of government toward improving population health outcomes by funding preventive, curative, and rehabilitative services across all tiers of the healthcare system. In Nigeria, public health expenditure constitutes a key component of social sector spending; however, its adequacy, structural composition, and allocative efficiency remain persistent subjects of policy concern (David & David, 2024). The level and composition of public health spending have been shown to significantly influence the efficiency of healthcare delivery systems in low- and middle-income countries, with scholars noting that poorly structured expenditure frameworks often yield suboptimal outcomes regardless of aggregate funding levels (Oyebola & Olusola, 2025).
Sustained government financing has equally been identified as critical for strengthening healthcare coverage and achieving universal health goals in resource-constrained settings (Chukwuma, 2019). In the Nigerian context, health service delivery measured through indicators such as life expectancy, maternal and infant mortality rates, access to primary healthcare, and availability of skilled health personnel remains persistently below regional and global averages, raising important empirical questions about the effectiveness of public expenditure in the sector (Uchechukwu, 2021).
Recurrent health expenditure represents the component of government health spending allocated to routine and ongoing operational activities within the healthcare system. This category of expenditure encompasses the salaries and wages of medical and non-medical personnel, procurement of pharmaceutical products and consumables, utility payments, professional training, and general maintenance of health facilities (Funmilola, 2022). Recurrent expenditure is essential because it ensures the day-to-day functioning of health institutions, thereby directly influencing the continuity and reliability of service delivery to the population. Adequate recurrent spending has been shown to enhance workforce productivity and improve service utilisation rates by ensuring the consistent availability of essential healthcare inputs (Obinna, 2021).
Summary of Chapters
CHAPTER ONE: INTRODUCTION: This chapter provides the foundation for the study, covering the background, statement of the problem, and the specific research objectives concerning public health expenditure in Nigeria.
CHAPTER TWO: LITERATURE REVIEW: This chapter conducts a comprehensive review of conceptual clarifications, theoretical frameworks (including Grossman's health demand model), and previous empirical studies regarding health expenditure.
CHAPTER THREE: RESEARCH METHODOLOGY: This chapter details the econometric framework, specifically the ARDL bounds testing approach and the error correction model used to analyse the time series data.
CHAPTER FOUR: RESULTS AND DISCUSSION: This chapter presents the empirical findings, including descriptive statistics, long-run and short-run ARDL estimation results, and diagnostic validation tests.
CHAPTER FIVE: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS: This final chapter synthesises the findings, presents core conclusions on the importance of rebalancing health expenditure, and offers specific evidence-based policy recommendations.
Keywords
Recurrent health expenditure, capital health expenditure, health service delivery, life expectancy, ARDL bounds testing, error correction model, Nigeria, human capital theory, Grossman model, public finance, health economics, infrastructure investment, fiscal policy, macroeconomic stability, policy rebalancing.
Frequently Asked Questions
What is the primary focus of this study?
This study investigates the impact of the structural composition of government health expenditure—recurrent versus capital spending—on health service delivery in Nigeria between 1990 and 2025.
What are the central thematic areas?
The research explores the economic rationale for health investment, the structural dominance of recurrent expenditure in Nigeria's budget, the long-run elasticity of health outcomes relative to different expenditure types, and the role of macroeconomic stability.
What is the primary goal of the research?
The study aims to provide empirical evidence on whether rebalancing Nigeria's health expenditure towards a higher share of capital investment would lead to improved long-run health service delivery outcomes.
Which scientific methods are applied?
The study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach within an Error Correction Model (ECM) framework to analyse annual time series data.
What topics are covered in the main body?
The analysis includes an in-depth review of theoretical literature, rigorous econometric testing of expenditure effects, diagnostic testing for model reliability, and a discussion of results in relation to historical economic shifts in Nigeria.
Which keywords characterise the research?
The core keywords include recurrent and capital health expenditure, health service delivery, ARDL bounds testing, and the Grossman health demand model.
How does the study address the 'gestation lag' of health investments?
The study uses the ARDL framework to specifically separate short-run dynamics from long-run equilibrium, confirming that while short-run effects are often statistically insignificant, the long-run impacts of capital investment are significant and substantial.
What is the significance of the findings regarding the current budget structure?
The findings indicate that Nigeria's current budget is structurally misaligned, as capital expenditure (which has a larger long-run impact) receives a historically low and volatile share compared to recurrent spending.
- Quote paper
- Peter Ellah (Author), 2026, Effect of Recurrent and Capital Health Expenditure, Munich, GRIN Verlag, https://www.grin.com/document/1736241
