Risk and Vulnerability to Poverty in Nigeria

ABSTRACT Recent empirical literature has shown that several factors can expose households to risk, thereby making them vulnerable to poverty. These appear to be the major challenges many households face in developing economies. This study therefore investigates risk and vulnerability to poverty in Nigeria using the revised General Household post-harvest panel survey for Nigeria. One objective is to analyze the types of risks households face and to determine if urban and rural households are disproportionately exposed to all kinds of risks. Other objectives are to ascertain how various types of risks affect vulnerability to poverty and the impact of household and community level characteristics on vulnerability. In order to achieve these objectives, the study employed the three-step Feasible Generalized Least Square (FGLS) estimation. The cross sectional analysis and the distribution of risk between urban and rural population were also calculated. The study found, though not surprisingly, that urban and rural households are not disproportionately exposed to all kinds of risks. However, it revealed that urban households are significantly exposed to risks associated with job loss, income, business failure, price increase in inputs, food items, kidnapping, robbery and hijacking. While risks such as harvest failure due to fire, poor rain, flooding, pest, livestock death, price decrease in output and dwelling demolition are commonly found among rural households. On the impact of various kinds of risk on vulnerability, the result shows a positive effect of job loss, important contact and harvest failure caused by rain, flooding and pest on vulnerability. Additionally, the study revealed that households with high dependency ratios are likely to be poor and more vulnerable than households with low dependency ratios. These findings therefore have some policy implications. First, policies that enhance increased farmers’ incentives through income and agro ecological extension package reduces their vulnerability and thus, should be adopted. Secondly, reduction in market risk such as price fluctuation, wage variability and unemployment are found to reduce vulnerability and finally, sponsored public enlightenment programmes on family planning is likely to reduce household size and their dependency. These therefore, suggest that government must re-examine its policies toward these urgent issues in the effort to reduce poverty