Effect of Income Diversification on Household’s Income in Rural Oyo State, Nigeria

Analysis of income diversification conceives of diversification in terms of strategies employed to earn cash income in addition to primary production activities from a variety of sources. It is often argued that this is a strategy primarily intended to offset risk. This study focused on analyzing the effects of diversification on household income in rural farming household in Oyo State, Nigeria. The result presented was based on primary data collected from a random sample of 120 households from two Agricultural zones (Ibadan/Ibarapa and Ogbomoso) of Oyo State. Descriptive statistics was used to describe the socioeconomic characteristics such as age, marital status and primary occupation of the respondents while two-stage least square (2 SLS) was employed to determine effect of diversification of income on per household income and income diversification of rural farming household. Results of descriptive statistics revealed that majority of the farmers were married with mean household size and age of 8 persons and 44 years respectively.2SLS showed that number of income source (NIS), share of off-farm income (OFS), Herfindahl Diversification Index (HDI), years of experience and farm size were positively significant to the per capita household income. Selected human capital variables such as years of education, years of vocational training and extension agent contacts have positive significant effect on income diversification of the farmers in the study area. The study concluded that number of income source and years of education were the major factors affecting per household income and income diversification of rural farming household.