Quarterly Journal of International Agriculture No. 4/09
Patterns of income diversification in rural Nigeria:
determinants and impacts
Raphael O. Babatunde
University of Ilorin, Nigeria
Matin Qaim
Georg-August-University of Göttingen, Germany
Abstract
While the determinants of rural income diversification have been
analyzed in various developing countries, the results remain somewhat
ambiguous. Likewise, many previous studies failed to consider the
impacts of diversification. Hence, more research is needed to
understand what conditions lead to what outcomes and to identify
appropriate policy responses. Here, we analyze the situation in rural
Nigeria based on recent survey data. The majority of households is
fairly diversified; 50% of total income is from off-farm sources.
Strikingly, richer households tend to be more diversified, suggesting
that diversification is not only considered a risk management strategy
but also a means to increase overall income. Econometric analysis
confirms that the marginal income effect is positive. Yet, due to
market imperfections, resource-poor households are constrained in
diversifying their income sources. Reducing market failures through
infrastructure improvements could enhance their situation, while, at
the same time, promoting specialization among the relatively better
off.
Keywords: farm households, income diversification, Nigeria, off-farm activities
JEL: D10, J21, Q12, R20
Vol. 48 (2009), No. 4: 305-320