The results also show that having additional income sources also reduces poverty incidence. Having a nonfarm enterprise reduced the likelihood of being in poverty by 8.5 percent. The effect was larger for external wage work as well as rental or investment income ranging from a 8 to 17 percent decrease in the likelihood of being in poverty according to the results in columns 1 and 3. The results in columns 2 and 4 verify that in additional to participation in a nonagricultural income activity, the amount of income received from these sources also significantly reduces poverty. We find that amount of farm land owned by the households is not significantly correlated with poverty. Again, emphasizing that size of farm land in Nigeria is not based on wealth mostly because the most common method of acquisition is through family or community distribution.

Several household characteristics also reduced the likelihood of being poor. Not surprisingly, the more members there are in a household, the higher the probability of being poor. This is especially true for the number of working age males and the number of dependents. Some characteristics of the head also show an impact on poverty. A married household head is more likely to be poor than a single head of household. Households that have a head with more education and with better access to credit are less likely to be poor as well.

# **V. CONCLUSION**

This paper provides a detailed look into the determinants of agricultural productivity in rural Nigeria and its link to poverty using nationally representative data. We find that a one percent increase in agricultural productivity will decrease the likelihood of being poor by between two and three percent. This shows that improvements in agricultural productivity could be very important for reducing poverty. Our results also indicate 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 rural Nigeria, as this is still the main activity for many households in the sector.

In our examination of the determinants of agricultural productivity, we find that the use of fertilizer and pesticide as well as labor (particularly male labor) is positively related to increased productivity. Land ownership is quite important for farm households, and households with larger farm sizes have higher value of harvest in general. However, we observe decreasing returns to scale in land size. It appears that large farms are not cultivated as intensely as smaller farms and are therefore underutilized. If farms in the top land quintile had half the median yield per hectare of farms in the lowest quintile, production of the top quintile would be 10 times higher.

Diversification is also important for rural households within and outside agriculture. Within agriculture, we find that households that grow a variety of crops have a higher productivity compared with those that only grow one crop. Diversification outside agriculture is also quite common for many rural households with about 50 percent of rural farm households also engaged in a nonfarm activity and our analysis shows that having a nonfarm activity reduces the

> ∂ Where is log harvest value per hectare, is poverty status, ∂ is the marginal effect, and is the change in the probability of being in poverty resulting from a 10 percent increase in (from the mean). xx yy ∆pp(yy= 1) xx

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