Humboldt-Universität zu Berlin - Quarterly Journal of International Agriculture

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


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