Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Analysis of Economic Shocks and Coping Strategies by Households in Nigeria

Olubunmi O. Alawode, Rejoice A. Mebo, Tadayoshi Masuda, and Ifeoluwa Adeputi

Abstract

Economic shocks are sudden and significant events or incidents that affect an economy's normal functioning, leading to unexpected changes in the economic conditions of the citizens. This study investigated how households in Nigeria cope with economic shocks and the coping strategies they employ to manage the shocks. Secondary data were obtained from Nigeria Living Standard Survey (NLSS, 2018/19) dataset. After cleaning, a total of 22,123 households were used. Descriptive statistics, probit and multivariate probit regression models were used to analyze the data. The major shocks reported by households were increase in food prices (23.4%), theft of property (9.94%), livestock deaths (7.58%), and increased input prices (7.33%). Also, the five major coping strategies adopted by most of the households were identified as; doing nothing (63.15%), receiving assistance from friends and family (18.77%), reduced food consumption (9.79%), reduced non- food consumption (8.22%), and being engaged in additional income-generating activities (8.22%). The probit regression results show that the probability of a household being exposed to shock reduces with having a male head who is married and living in an urban area. Also, being engaged in formal wage-paying employment increases the probability of economic shocks. The multivariate probit regression results indicate that male-headed households would not probably engage in additional income-generating activities, receive assistance from friends and family, and reduce food and non-food consumption as coping strategies for shocks experienced. The covariance of the error term and the likelihood ratio test indicate that receiving assistance from friends and family, and being engaged in additional income generating activities were positively and significantly associated, showing the two strategies are complements. Also, doing nothing and receiving assistance from friends and family, reduced food consumption and non-food consumption, were substitutes. Economic shocks experienced by Nigerian households and the coping strategies adopted are influenced by socioeconomic factors. Investments in agricultural development and community-based projects, education and skill development, will enhance resilience to economic challenges.

Keywords

Aggregate shocksIdiosyncratic shocksComplement coping strategiesSubstitute coping strategies

References

Ajefu, J. B., Demir, A. & Rodrigo, P. (2023). Covid-19-induced shocks, access to basic needs and coping strategies. The European Journal of Development Research, 35(6), 1347–1368. https://doi.org/10.1057/s41287-023-00584-y Alabi, D. L., Alao, O. T., Famakinwa, M., & Ogunleke, T. R. (2020). Gender Assessment of Coping Strategies Adopted by Rural Households During Economic Recession: A Case of Osun State, Nigeria. Contemporary Agriculture, 69(3–4), 81-89. https://doi.org/10.2478/contagri-2020-0011 Alawode, O. O. and Oladokun, Y. O. M. (2024). Socio-economic Effects and Evidence-based Households’ Response to Covid-19 in Nigeria. In Alola, A. A., Bekun, F. V. and Alola, U. V. (Eds.) Economic Trends and Sustainable Environmental Assessment. Boca Raton: CRC Press. 212-231pp. ISBN: 978-1-032-30675-9. Ansah, I. G. K., Gardebroek, C., & Ihle, R. (2021). Shock interactions, coping strategy choices and household food security. Climate and Development, 13(5), 414–426. https://doi.org/10.1080/17565529.2020.1785832 Amaglobeli, D., Hong, G. H., Hanedar, E., Thevenot, C. & Gu, M. (2023). Policy responses to high energy and food prices. IMF Working Papers, 2023(074), 1. https://doi.org/10.5089/9798400237768.001 Amolegbe, K. B., Wirba, E. L. & Kane, G. Q. (2022). Economic shocks and welfare of Nigerian households. Socioeconomic Shocks and Africa’s Development Agenda, 199-213. doi:10.4324/9781003208358-18 Bajpai, S. & Vispute, S. (2021). Psychological wellbeing and personal coping strategies during COVID-19 lockdown: An empirical study. Journal of Pharmaceutical Research International, 103-116. doi:10.9734/jpri/2021/v33i43a32471 Bongaarts, J. (2020). United Nations Department of Economic and Social Affairs, Population Division, World family planning 2020: Highlights, United Nations publications, 2020. 46 P. Population and Development Review, 46(4), 857-858. https://doi.org/10.1111/padr.12377 Cappellari, L. & Jenkins, S.P. (2003) Multivariate probit regression using simulated maximum probability. Stata J., 3, 278–294. Chiappori, P.-A., & Mazzocco, M. (2017). Static and intertemporal household decisions. Journal of Economic Literature, 55(3), 985–1045. https://doi.org/10.1257/jel.20150715 Chukwuone, N. A., & Amaechina, E. C. (2021). Factors affecting climate change coping strategies used by smallholder farmers under root crop farming systems in derived savannah ecology zone of Nigeria. Environmental Development, 39, 100627. https://doi.org/10.1016/j.envdev.2021.100627 De Stefani, A., Laws, A. & Sollaci, A. (2022). Household vulnerability to income shocks in emerging and developing Asia: The case of Cambodia, Nepal and Vietnam. IMF Working Papers, 2022(064), 1. doi:10.5089/9798400205538.001 Eboiyehi, F. A., & Muoghalu, C. O. (2017). Economic recession, challenges, and coping strategies among the rural aged in selected communities in Ile-Ife of South-Western Nigeria. Health and Social Care in the Community, 25(4), 1300-1309 Head, B.W. (2022). Complexity, Crises and Coping Strategies. In: Wicked Problems in Public Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-94580-0_4 Junaidi, J., Amril, A., & Hernando, R. (2022). Economic Coping Strategies and Food Security in Poor Rural Households. Agricultural And Resource Economics: International Scientific Journal, 8(1), 30-51Komolafe, M., & Oluseyeibuken, O. (2018). Economic impacts of income shocks on households in Osun State, Nigeria. International Journal of Business and Economics Research, 7(6), 126-130. Kudaisi, B.V. (2022). Income shock and coping strategies of government workers in Southwest Nigeria: Evidence from the survey data. Timisoara Journal of Economics and Business, 15(1), 51-72. https://doi.org/10.2478/tjeb-2022-0004 Mba, P. N., Nwosu, E. O. & Orji, A. (2021). Effects of Exposure to Risks on Household Vulnerability in Developing Countries: A New Evidence From Urban and Rural Areas of Nigeria. SAGE Open, 11(1). https://doi.org/10.1177/21582440211002214 Mkpado, M., & Omowole, O. E. (2020). Coping strategies among female farmers in Ondo state, Nigeria during recent economic recession: What factors matter? Agricultura Tropica et Subtropica, 53(3), 137-147. https://doi.org/10.2478/ats-2020-0014 Newman, C., & Tarp, F. (2020). Shocks and agricultural investment decisions. Food Policy, 94, 101810. https://doi.org/10.1016/j.foodpol.2019.101810 Ngenoh, E., Kebede, S. W., Bett, H. K. & Bokelmann, W. (2018). Coping with shocks and determinants among indigenous vegetable smallholder farmers in Kenya. Agricultural Sciences, 09(07), 804–823. https://doi.org/10.4236/as.2018.97057 Nikoloski, Z., Christiaensen, L., & Hill, R. (2017). Coping with shocks: The realities of African life. Agriculture in Africa: Telling Myths from Facts, 123-134. doi:10.1596/978-1-4648- 1134-0_ch14 Nkurunziza, F., Kabanda, R., & McSharry, P. (2023). Determinants of shock-coping mechanisms adoption and rural household consumption in Rwanda: A two-stage analysis considering both idiosyncratic and covariate shocks. Cogent Economics & Finance, 11(2), 2238462. https://doi.org/10.1080/23322039.2023.2238462 Obi-Egbedi, O. & Owosho, E.O. (2023). “Agricultural Shock Coping Strategies and Food Security Among Farming Households in Nigeria”. Journal Of Economics and Allied Research 8 (2):147-58. Https://Jearecons.Com/Index.Php/Jearecons/Article/View/307. Ogunyemi, A.I., Olutumise, A.I., & Ademola Adegoroye, A. (2022). Household Coping Strategies and The Extent of Vulnerability to Food Insecurity: Lessons from Yam Farmers in Ekiti State, Nigeria. International Journal of Food Science and Agriculture, 6(4), 379-388. Doi: 10.26855/Ijfsa.2022.12.004 Olawuyi, O. S, Oluwaseun, O. A., Jeremiah, I. O., Dolapo, O. T., Ayodele, A. R., & Ajibola, A. R. (2022). Vulnerability to livelihood-shocks among agrarian households in Oyo state, Nigeria. Ecology, Environment and Conservation, 28(04), 1697-1709. doi:10.53550/eec.2022.v28i04.004 Omotayo, A.O., Omotoso, A.B., Daud, S.A., Omotayo, O.P., & Adeniyi, B.A. (2022). Rising Food Prices and Farming Households Food Insecurity During the Covid-19 Pandemic: Policy Implications from Southwest Nigeria. Agriculture, 12(3), 363. Osabohien, R. A., Jaaffar, A. H., Ibrahim, J., Usman, O., Igharo, A. E., & Oyekanmi, A. A. (2024). Socioeconomic Shocks, Social Protection and Household Food Security Amidst Covid-19 Pandemic in Africa's Largest Economy. Plos One, 19(1), E0293563. Https://Doi.Org/10.1371/Journal.Pone.0293563 Osita, F.C., Olisaemeka, D.M. & Chikwuemeka-Onuzulike, N. (2020). Impact of COVID-19 on the survival of Igbo-owned businesses in Nigeria: The nexus. International Journal of Financial, Accounting, and Management, 2(2). https://doi.org/10.35912/ijfam.v2i2.178 Qayyum, U. & Nigar, N. (2023). Analysing the impact of idiosyncratic and covariate shocks on households’ food and non-food consumption: empirical evidence from Benazir Income Support Program. Environ Dev Sustain (2023).https://doi.org/10.1007/s10668-023-03629- 8 Rasul, G., Nepal, A. K., Hussain, A., Maharjan, A., Joshi, S., Lama, A., Gurung, P., Ahmad, F., Mishra, A., & Sharma, E. (2021). Socio-Economic Implications of COVID-19 Pandemic in South Asia: Emerging Risks and Growing Challenges. Frontiers in sociology, 6, 629693. https://doi.org/10.3389/fsoc.2021.629693 Rufai, A. M., Ogunniyi, A. I., Abioye, O. D., Birindwa, A. B., Olagunju, K. O. & Omotayo, A. O. (2021). Does economic shocks influence household's healthcare expenditure? Evidence from rural Nigeria. Heliyon, 7(5), e06897. https://doi.org/10.1016/j.heliyon.2021.e06897 Shehu, A. & Sidique, S. F. (2015). The effect of shocks on household consumption in rural nigeria. The Journal of Developing Areas, 49(3), 353–364. https://doi.org/10.1353/jda.2015.0163 United Nations Development Programme UNDP (2011, March 21) Definition and types of shocks and shocks and coping strategies coping strategies to be monitored. PEP-CBMS Network Coordinating Team, Technical Workshop on “Monitoring household coping strategies during complex crises” Sommerset Millennium Hotel, Southwest England. Viña, A. & Liu, J. (2023). Effects of global shocks on the evolution of an interconnected world. Ambio, 52(1), 95–106. https://doi.org/10.1007/s13280-022-01778-0 Yusuf, H. A., Folorunso, O. A., & Yusuf, H. A. (2021). Determinants of yam farmers’ choice of coping strategies to economic recession in Oye local government area, Ekiti state, Nigeria. Journal Of Agricultural Economics, Environment and Social Sciences, 7(2), 52–60. https://doi.org/10.56160/jaeess202172006

More Articles from JOURNAL OF BUSINESS AND AFRICAN ECONOMY

Monetary Policy Transmission Mechanism and Economic Growth in the West African Monetary Zone, 2000-2025

Author: i, Okolie, Romanus Onyeisi, ii, Emeter Patrick Okechukwu, iii, Aduba Paul Nnamdi, iv, Eneaniofu Daniel Mmaduakonam, v, Okwor Emmanuel Ejimnkonye

Inventory Management and Organisational Performance of Selected Manufacturing Firms in Southwest, Nigeria

Author: Akande, Folashade Adebisi, Ibojo, Bolanle O. PhD, Akinruwa, Temitope E. PhD

Monetary Policy and Performance of Deposit Money Banks in Nigeria

Author: Egbuho, Chika Anthonia, Njoku, Kevin Chinaka. Isukul, Araniyar. Chinedu.