Agricultural Commercialisation, Income Inequality, and Rural Welfare in Nigeria: Panel Data Evidence

This study empirically examines the relationships among agricultural commercialisation, income inequality, and rural welfare using panel data from Nigerian farming households. Agricultural commercialisation is widely promoted as a pathway from subsistence to market-oriented farming that raises incomes, yet its distributional effects are contested, with some evidence suggesting that commercialisation benefits wealthier farmers disproportionately and may worsen rural income inequality. This study uses three waves of the Nigeria Living Standards Measurement Study panel survey covering 2010, 2016, and 2019. Household commercialisation is measured using the household commercialisation index. Rural welfare is assessed through per capita consumption, poverty headcount, and Gini coefficient of income distribution. Fixed effects panel regression and instrumental variable estimation address endogeneity of commercialisation. Heterogeneity analysis examines commercialisation effects by initial wealth quartile, gender, and geographic zone. Findings reveal that commercialisation significantly increases average rural household welfare, but the income gains are unequally distributed. Wealthier quintile households capture 60 percent of total commercialisation-induced income gains. Commercialisation in southern states shows lower inequality effects than northern states, partly reflecting better market infrastructure and lower transaction costs. The study concludes that commercialisation-promoting policies must be accompanied by equity-enhancing measures to prevent widening rural income inequality. It recommends targeting commercialisation support to smallholder households in the lower income quintiles.

Keywords: agricultural commercialisation, income inequality, rural welfare, panel data, Nigeria.