We find an elasticity of poverty reduction with respect to agricultural productivity of between 0.25 to 0.3 percent implying that a 10 percent increase in agricultural productivity will decrease the likelihood of being poor by between 2.5 and 3 percent. This is a sizeable effect suggesting that improvements in agricultural productivity could be an effective means to reduce rural poverty. We also find that income from wages and other nonfarm activities have a larger effect on poverty reduction than agriculture. However, this does not diminish the importance of agriculture for poverty reduction in Nigeria. Agriculture is still the dominant sector for many households in Nigeria, particularly in rural areas where it employs almost 84% of households and accounts for 56 percent of rural net income. To increase agricultural productivity, we find that land, labor, fertilizer, agricultural advice, and diversification within agriculture are the most important factors.

The analysis in this paper focuses on a single cross section of Nigerian farmers in 2010/2011. In future work we plan to delve deeper into the link between agricultural productivity and poverty utilizing additional waves of the GHS-Panel. The second wave was completed in March 2013 and the third wave will be completed in March 2015. Utilizing the three waves will enable a more rigorous empirical analysis and allow us to assess whether and how the determinants of agricultural productivity and the productivity-poverty relationship have varied over time. Furthermore, it will provide some indication of the effectiveness of recent agricultural policies (especially the government’s Agricultural Transformation Agenda) at improving productivity and reducing poverty amongst Nigerian farmers. The analysis in this paper therefore provides a baseline analysis for this future work.

This paper is organized as follows. The next section will provide some background information on the agricultural sector in Nigeria and also describe that GHS-panel data used in the analysis. Section III lays out the methodology used to examine these two linkages followed by a presentation and discussion of the results in Section IV. Section V concludes.

# **II. BACKGROUND AND DATA**

The agricultural sector in Nigeria consists mostly of smallholder farmers who operate at the subsistence level. Despite concerns about the sector’s performance, it remains an important source of rural employment and income. There are many constraints facing the agricultural sector in Nigeria, and one of the main constraints is the low rates of input use, particularly fertilizer which is also commonly of poor quality due to adulteration<sup>1</sup> . In their review of constraints to agriculture productivity in Nigeria, Philip et al. (2009) attribute the low levels of input use to high transport costs, poor distribution channels, absence of private sector participation, significant import risk, and inconsistent government policies. Access to agricultural credit and efficient coordination of agricultural extension services can have beneficial spillover effects on the adoption of farm technologies, and these are also found to be lacking in the Nigerian agricultural sector (Philip et al., 2009). Poor access to input and output markets (largely due to poor rural infrastructure), land degradation, and low investment in agricultural research have also been identified as significant constraints to productivity in the

> 1 See Liverpool-Tessie et al. (2010) for an assessment of fertilizer quality regulation in Nigeria

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