Journal of Rural Economics and Development vol. 20 No. 1 Rural Economics and Development HOUSEHOLDS’ VULNERABILITY TO POVERTY IN IBADAN METROPOLIS, OYO STATE, NIGERIA Adepoju, A. O. and F.Y. Okunmadewa Department of Agricultural Economics, University of Ibadan, Ibadan, Oyo State, Nigeria Abstract This paper empirically assessed vulnerability to poverty at the household level using a two-period panel data set obtained from 150 households sampled from two local government areas within Ibadan Metropolis. Data were analysed using descriptive statistics, poverty indices and probit regression analysis. Analysis of the socio-economic characteristics and their relationship with vulnerability to poverty revealed that large-sized households headed by men who were old, widowed, self-employed, uneducated or who had only primary school education and no access to any form of credit, were more vulnerable than other households. The estimated probit regression model showed that marital status and tertiary education status of respondents reduced vulnerability to poverty while primary education status and household size enhanced households vulnerability to poverty. JEL-Classification: I31, I32, R20 Keywords: Vulnerability, Poverty, Oyo State, Nigeria *Correspondence E-mail [email protected]; Telephone number: +2348033335958 Introduction projects has brought the issue of vulnerability The high incidence of poverty in to the attention of policy makers. Nigeria, despite myriads of interventions by Vulnerability, has been defined as the governments and NGOs to reduce it through likelihood that at a given time in the future, an poverty alleviation/reduction programmes and individual will have a level of welfare below 44 Journal of Rural Economics and Development vol. 20 No. 1 some norm or benchmark (Quisumbing, Poverty assessments draw on cross- 2002).One likely reason poverty has been on sectional household survey to provide a the increase may be that it has been seen by detailed profile of the poor, and to document several researchers as a static phenomenon the incidence of poverty in various segments rather than a dynamic one. Recent studies of the population. The incidence of poverty in have however observed movements in and out Nigeria however remains high. The World of poverty of households in developing Bank (1996) statistics on income and social countries (Adams and He,1995). This is an indicators show poverty in Nigeria to be indication that poverty is not a static widespread, severe and most certainly phenomenon as people can move out of and increasing. This brings to the fore, the issue fall into poverty. According to Baulch and of vulnerability which is defined as the McCulloch (1998) “a high percentage of probability that a household if currently poor, households move into poverty due to will remain in poverty or if currently non- temporary shocks (such as illness or loss of poor will fall below the poverty line in employment) that are reversed just one or two explaining the ever-increasing level of years later. Similarly, many of the people who poverty. escape poverty or who are not vulnerable now Vulnerability however, which suggests only succeed in doing or being so for one or exposure to the possibility of an adverse two years before a reverse in their outcome in the future, has not been widely circumstances forces them back below used alongside poverty in discussions of poverty line which makes them vulnerable”. poverty reduction strategies even though the Ligon and Schechter (2003) defined risks that households face are an important the essence of vulnerability as the uncertainty aspect of their wellbeing. This shows a of future income streams and associated loss limited understanding of a household of welfare caused by this uncertainty. They vulnerability to poverty. While it is noted that “a household with very low commonly asserted that the poor are among expected consumption expenditures but with the most vulnerable in any society (e.g. no chance of starving may well be poor but it World Bank, 2001), the overlap between still might not wish to trade places with a poverty and vulnerability is not perfect. There household having a higher expected seems to be general agreement that poverty is consumption but greater consumption risk”. a static concept, defined at a single point in However, it is not every time people are time, while the concept of vulnerability exposed to risk that they are vulnerable i.e. a situated in a dynamic context is less well shock might occur, but may not necessarily defined. Clarifying the distinction between lead to the households being vulnerable. The poverty and vulnerability is important concept of vulnerability therefore, is dynamic especially since social protection strategy is and is broadly an ex-ante or forward looking moving from ex-post poverty strategies to ex- measure of a household’s well being or (lack ante vulnerability considerations (Holzman, thereof). Hence, when thinking about 2001). forward-looking anti-poverty interventions In most developing economies, that aim to prevent rather than alleviate estimation of vulnerability has been mainly poverty, what really matters is the through the use of cross-sectional household vulnerability of households to poverty”. survey data but in principle the use of panel data permits the estimation of vulnerability 45 Journal of Rural Economics and Development vol. 20 No. 1 within a more general framework and allows occurring i.e. with less than certainty. for the inclusion of time-invariant household Individuals/households have some a priori effects and dynamic effect and in some cases sense of the likelihood of these events to get a sense of the magnitude of biases in occurring, without direct control over its estimates of vulnerability generated from likelihood. The lack of direct control over the cross-sectional data (Chaudhuri, 2000).This risk they face is crucial and distinguishes it study will therefore attempt to contribute to from the responses one can observe from an understanding of vulnerability of individuals, households and communities given households to poverty in Nigeria since a pre- the risk they face. While the concept of risk condition for successful anti-vulnerability refers to uncertain events that can damage the policies is the identification of the group of well being of people such as falling ill, vulnerable households, together with an (Christiaensen and Subbarao, 2001), understanding of the sources of vulnerability. vulnerability is a function of the risk Consequently, there is a need for government characterization of a person’s environment - to proactively take measures to protect the nature, frequency and severity of the shocks vulnerable households and in order to do so, he is exposed to, his exposure to these risks as vulnerable households have to be identified. well as his ability to cope with it when the The nature of their vulnerability also needs to shock materializes which is determined by his be examined. The main objective of the study asset endowments and his ability to insure is to assess the vulnerability of households to himself (formally or informally) (Alayande, poverty in Ibadan Metropolis. The rest of the 2002). Vulnerability is therefore the product of paper is in four sections. Section two presents risk, but also of household conditions and the literature review while section three actions (Dercon, 2001). describes the methodology of the study. A World Bank study on risk Section four presents the empirical findings management in South Asia also defines while section five concludes the paper. vulnerability as the likelihood of being adversely affected by a shock that usually 2. Literature review causes consumption levels, or other factors that affect well-being to drop (World Bank, 2.1 Risks, vulnerability and poverty 2001b). On the other hand, Chambers (1989) There are many definitions of opined that vulnerability is one among the vulnerability, and seemingly, no consensus on different dimensions of deprivation, which its definition and measurement. (Chaudhuri, include such other concepts as physical 2000; Christiaensen and Subbarao, 2001) weakness, isolation, poverty and define vulnerability as the ex-ante potential of a powerlessness. Therefore in addition to risk decline in future well being, or the ex-ante exposure, which signifies the probability that probability of falling below the poverty line at a person will be affected by uncertain events some future date. In support of this, McCulloch which may lead to welfare loss, vulnerability and Calandrino (2003) view vulnerability as reflects the lack of capacity to cope with a the probability of being below the poverty line shock ex-post. It is concerned with the ex- in any one year. Vulnerability is ante potential of a decline in well-being in the multidimensional, and households face a future. Thus, it is a dynamic concept that number of risk. The risk faced by an generally involves a sequence of events individual/household relates to events possibly following some shocks (Alayande, 2002). 46 Journal of Rural Economics and Development vol. 20 No. 1 Concepts of vulnerability and poverty elements. First is one due to a low level of (which is also multidimensional) are linked and limited variance in consumption and a but not identical. For example, Chaudhuri, et second due to high level of and much al. (2002), submit that vulnerability is an ex- variance of consumption. However, ante (forward-looking) rather than an ex-post measuring income and consumption concept. Whereas poverty status can be dynamics and variability requires specific observed at a specific time period, given the types of data: These include cross sectional welfare measure and the poverty threshold, data and longitudinal data. Relying on single household vulnerability is not directly cross-sectional data requires making stringent observed, rather it can only be predicted. The assumptions regarding the stochastic process observed poverty status of a household generating consumption e.g. that cross (defined simply by whether or not the sectional variability proxies interpersonal household’s observed level of consumption variation.