Household Financial Vulnerability and Coping Strategies During Economic Shocks in South West Nigeria: An Empirical Assessment

Economic shocks, including currency devaluation, food price inflation, and employment disruptions, create financial vulnerability among households and reveal the adequacy of the formal financial safety net in Nigeria. This study empirically assesses household financial vulnerability and coping strategies during the 2022 to 2023 economic shock episode in South West Nigeria, using primary survey data from 450 households across Lagos, Ogun, and Ondo States. Financial vulnerability was measured using a composite Financial Vulnerability Index incorporating income adequacy, debt burden, liquid asset cushion, and social protection access. Coping strategies were assessed by expenditure reduction, asset liquidation, informal borrowing, and remittance receipt. Binary probit and ordinal logistic regression models were employed to identify determinants of vulnerability and coping strategy choice. Results showed that 62% of sampled households were moderately to severely financially vulnerable during the study shock period. Formal financial inclusion (having a bank account and insurance coverage) reduced vulnerability probability by 24 percentage points (marginal effect = -0.24, p < 0.01). The most commonly deployed coping strategy was expenditure reduction (adopted by 78% of households), followed by informal borrowing (52%). Formal credit use as a coping mechanism was negligible (8%), reflecting credit inaccessibility. The study fills a gap in sub-national household financial vulnerability evidence and recommends expanding micro-credit access and emergency savings products through formal financial institutions as structural economic shock resilience tools in South West Nigeria. Keywords: financial vulnerability, economic shocks, coping strategies, financial inclusion, South West Nigeria