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Effect of Poverty on Risk Attitudes of Farmers in Benue State, Nigeria

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Abstract

The study investigated the Effects of Poverty on the Risk Attitudes of
Farmers in Benue State, Nigeria. Nigeria has remained one of the poorest
countries in the world and Benue State in particular was ranked the eight poorest
of the thirty-six states of the Federation. The dominance of the oil sector and the
consequent neglect of agricultural sector is one of the major precursors of
poverty in Nigeria. Small-scale farmers who operate in an environment
characterized by risk and uncertainty produce the bulk of Nigeria's food and fibre.
Presently, the Nigerian agriculture is characterized by low productivity, low level
of technological adoption, and use of inefficient production techniques. The
present poor state of the Nigerian agriculture is related to farmers1 attitudes
towards risks in the production and socioeconomic environment.
Based on the above problems the specific objectives of the study
were to: determine the extent of poverty among farmers in Benue State; identify
the various risk situations faced and risk aversion strategies employed by
farmers with differing poverty levels; assess the risk attitudes of farmers; and
determine the effect of poverty and socioeconomic variables on risk attitudes of
the farmers.
A multistage random sampling technique was used for selecting the
respondents. One hundred and twenty (120) farm households were used for the
study. The data were collected during the 200312004 farming season. The data
were analyzed using the Foster Greer Thorbercke poverty measures, descriptive
statistics, Likert scale, safety-first model and multiple regression analysis.
.Results of the study showed that the households on the average
contained about 7.6 persons, with annual per capita income of 4432,491 and had
a total land holding of 4.8 hectares. The household head was about 44 years and
had spent about 5.5 years in school. Using the international poverty line of US$1
per day per person, the result revealed that 78.3% of the respondents were poor
and that the depth of poverty, that is the mean distance of the income of the poor
from the poverty line was 42.5% which is approximately 8119,800 below the
poverty line (0546,519 per annum). Majority of the respondents lived in thatched
mud houses (51.7%), fetched water from unsafe sources such as wells and
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rivers (96.7%), had no toilet facilities (49.2%), and no access to electricity (85%).
The degree of poverty was found to be related to farmers' socioeconomic
characteristics.
The study identified the following types of risk situations faced by farmers:
changes in crop yieldllivestock production (16.7%), cropllivestock prices (8.3%),
technology (4.2%), cost of inputs (9.2%), credit availability (1 1.7%), labour
scarcitylavailability (9.2%), weather (1 5%) etc. Analysis showed that risk
situations faced by farmers were independent of their poverty levels. The risk
management strategies used by the farmers included among others: combination
of different cropsllivestock (14.2%), combination of crop and livestock enterprises
(8.3%), replanting of crops (7.5%), use of .improved varieties (10.8%), use of
pesticideslherbicides (9.2%), spreading of saleslharvest (6.7%), engagement in
non farm income activities (10.8%) etc. Result showed that the risk management
strategies employed were independent of farmers' poverty levels.
The result of the assessment of farmers' attitudes toward price risk
showed that 86.7% were risk averse, 11.7% were risk seeking and 1.7% were
risk neutral using scale 1 classification, whereas all farmers were classified as
risk averse under scale 2. Using the safety first model to assess respondents
attitude towards yield risk, it was found that 71.7% were high risk averse, 25.8%
were intermediate risk averse, 1.7% were low risk averse and only 0.8% was risk
preferring. Regression analysis showed that age, household size, educational
level, extension contact, membership in a solidarity group and degrees of poverty
were significant determinants of risk attitudes.
.Based on the findings of the study there is need to consider socioeconomic
and poverty variables of farmers when designing new farm
technologies and other agricultural policies in Benue state. Policies to improve
the literacy level of the people, and access to agricultural inputs were
recommended. Also the use of social protection practices such as income
insurance, price-support schemes, credit insurance, etc, which may be helpful
strategies in mitigating the effects of poverty on risk attitudes of farmers were
recommended.