Regression Analysis of Health and Defense Expenditure on Economic Growth in Nigeria

Abstract

This research work measures the effects of defence and health expenditures on Economic growth in Nigeria. In a bid to justify this work, data from 1970 to 2015 were collated from the annual statistical Bulletin of the Central Bank of Nigeria volume 27. The Error Correction Mechanism (ECM) and Granger Causality methods were methods of analysis used in the estimation of the models. The econometric software Eviews 8.0 was used to carry out the estimation. 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. Diagnostic tests such as Normality and autocorrelation tests were carried out on the model’s outputs to establish the robustness or otherwise of it. It was found that the residuals were normally distributed and no autocorrelation present. 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. Based on the findings of this work, recommendations made among other things include: Government should increase funding of the military so as to increase GDP; Government should also step up spending on the health sector and stepping up the provision of employment to teeming population so as to enable them contribute meaningfully to the growth of the economy.