Macroeconomic Effects of HIV/AIDS Prevalence and Policy in Nigeria: A Simulation Analysis

This study develops a macroeconometric model of the Nigerian economy to examine the potential impact of human immunodeficiency virus (HIV)/ acquired immunodeficiency syndrome (AIDS) on key macroeconomic outcomes in Nigeria. The baseline model of the Nigerian economy is estimated using data from 1980 to 2000. The simulated values of key endogenous macroeconomic outcomes are shown to closely follow actual historical data and also future macroeconomic outcomes from 2001 to 2006. Simulations are conducted to examine (1) the potential effects of an increase in HIV/AIDS prevalence and (2) the potential effects of increased government expenditure for treatment and prevention of HIV. The simulations show increased HIV/AIDS prevalence will reduce output in the agriculture and manufacturing sectors and will have little or even a positive effect on output in the oil and gas sector. The simulations also show that increased government spending on HIV treatment and prevention will increase output across all industries; however, it will reduce gross fixed capital formation and capital expenditures.