1.1 Background Information
The rate of poverty incidence in Nigeria in the past three decades has been a major concern for policy makers. National Bureau of Statistics, NBS (2005) recorded that the incidence of poverty in Nigeria increased sharply between 1980 (28.1%) and 1985 (46.3%) and although there was a slight decrease in poverty between 1985 and 1992 (42.7%), poverty incidence increased to 65.6% in 1996.Poverty incidence in Nigeria stood at 70%; 2007 estimate according to CIA (2011). Unfortunately, these numbers are getting worse. Between 1993 and 2003, the share of the population living in extreme poverty (US$1/day income) rose from 59 percent to 71 percent, and the share living in moderate poverty (US$2/day income) rose from 85 percent to 92 percent (WDI 2007). A worrisome dimension is the fact that poverty is disproportionately concentrated among households whose primary livelihood depends on agricultural activities. Besides the fact that there have been some level of agricultural growth of 6.5% between 2002-2006 in Nigeria and then 40.84% of GDP in 2010(NBS, 2011), the problem of poverty among farm families still persists (WDI, 2007).
World Bank (2008) recorded that Nigeria`s rural space is home to 53% of the nation’s population and also home to more than 70% of the nation`s poor. Notwithstanding the increasing rate of poverty among farm households, the Nigeria agricultural policy focus of food self-sufficiency is still couched mainly in terms of increasing physical output of domestically produced commodities, neglecting the issue of income of farm households, thus making the agricultural policy, commodity centered instead of people centered (Idachaba, 2006).
One of the effective ways through which agricultural income of farm households can be improved is by broadening their household physical asset base. Chaudhry, Malik and Hassan (2009) had posited that physical assets contribute significantly to per capita income.Escobal and Torero (2005) observed that complementarities between social and physical assets and between private and public assets may be responsible for different patterns of income growth. Physical assets are commonly portrayed as the most important determinant of income and investment strategies, and it has been argued that a more equitable distribution of assets could contribute to poverty alleviation (Rahman and Westley 2001).
Physical assets help to increase opportunities to be more productive or to obtain credit facilities and even to serve as safety nets. Diversity in asset choice is important in order to allow households to manage risks in any one period. In fact any household that lacks access to physical assets and other productive resources is unlikely to survive any negative shock and as a survival strategy will adapt risk averse production strategies (Aryeetey, 2004).
Moreover, the distribution of assets will also affect the rate of returns to investments, thus reinforcing the tendency towards income inequality (Walle and Gunewardena, 2001). Unequal distribution of assets affects the equal distribution of opportunities for building both physical and human capital in the future (Deininger and Squire, 1998; Deininger and Olinto, 2000).
In general, the distribution of assets is the key determinant of income distribution (Alesina and Rodrik, 1994). For example, Finan, Sadoulet and de-Janvry, (2002) found out that for small landholders, an additional hectare of land increases welfare on average by 1.3 times the earnings of an agricultural worker. In fact the failure of many poverty reduction interventions has been because they ignored the great diversity and heterogeneity of asset portfolio across households (Finan, Sadoulet and de-Janvry, 2002).
Farm householdsown anduse a variety of assets for their various agricultural production activities. The asset portfolio of the farmer may include livestock, farm equipment, buildings, farm lands (hectares of cropped land), net savings, net remittances, consumer durables, non-real estate assets and social capital. Aryeetey and Udry (1998) constructed four simple asset categories: house (which is the value of the house plus consumer durables), farm (the value of livestock, farm equipment, and other lands), non-farm (the value of assets of the non-farm enterprise), and finance (the value of cash balances,
financial savings, shares, net remittance assets). Moser (2007) defined physical assets as the stock of plant, equipment, infrastructure and other productive resources owned by individuals, the business sector or the entire country. This study consider physical assets as those productive assets of the farm household that includes the value of livestock, farm equipment and other lands owned by the household. However, human capital, financial assets, house and its content are excluded from this definition. The physical assets considered in this study include land, more importantly because it is regarded in most developing countries as the main physical asset of farm households (Reardon and Vosti, 1995; Pablo and Jose Maria, 2009), it is the basis of agricultural production for both home consumption and sales. Land is also possible collateral for loans, gives security towards shocks as a store of wealth, and is a place for housing. (World Bank 1999; Freeman et al. 2004; Agudelo et al. 2003; De Janvry and Sadoulet 2000.); livestock, because it contributes 40% of the global value of agricultural outputs and supports the livelihood of 700 million poor farmers (Spore,2011); and agricultural equipment and machinery.
Social capital represents the ability of households to secure benefits by virtue of membership of social networks or other social structures (Portes, 1998). The social capital of a society includes the institutions, the relationships, the attitudes and values that govern interactions among people and contribute to economic and social development (Grootaert and Bastelear, 2002). Social capital as an asset has gained significant recognition in determining economic and welfare outcomes at the household level which cannot be explained by differences in traditional production inputs such as labour, land, human and physical capital (Grootaert, 1999). Furthermore, Narayan and Pritchett, 1997; Grootaert, 1999 showed that social capital had greater influence on economic outcome compared with human capital and other forms of capital.
Social capital complements human and physical capital in order to realize the full benefits of any development programme (Okunmadewa et al, 2005). Studies in Nigeria have shown that the poor derive more benefits from their membership of local associations compared with publicly instituted organizations (World Bank, 1996; Olayemi et al, 1999; Okunmadewa, 1998; and World Bank/DFID, 2000). World Bank (1999) found out that the poor in Nigeria turn to local community based organizations (CBOs) as the main safety net for their well being. Prominent among these social safety nets are religious groups, traditional leadership, educational institutions, women’s group and traditional financial institutions among others.