Social Capital, Food Consumption Expenditure and Rural Poverty Reduction in Nigeria

One of the challenges that many countries, especially developing ones, are currently confronting is their inability to control the rate of poverty (Abdussalam et al., 2014; Singh and Chudasama, 2020). The poverty of people living in these countries exposes them to poor living conditions, negative returns on businesses, disease and poor food consumption. In most poor nations, a substantial percentage of impoverished people can be found in rural regions, which are notable for having a significantly higher poverty rate than urban areas (Arham and Dai, 2020). In Nigeria, 16.8% of the population is classified as vulnerable to multidimensional poverty, while 51.4% of the population is classified as multidimensionally poor. The multidimensional poverty index (MPI) (ranges between 0 and 1) for the country, which is adjusted to account for the severity of deprivation, is estimated at 0.291. The average deprivation score for those living in multidimensional poverty, known as the depth of deprivation (intensity), is 56.6% (OPHI, 2017). Despite the significant resources (human and physical) allotted by successive administrations to reduce the country’s poverty rate, high incidence and depth of poverty continue to have unfavorable effects in Nigeria (Nigeria Human Development Report, 2019). Despite its wealth, Nigeria is currently ranked third in the world for poverty, with 47 percent of the population classed as extremely poor in 2016 and 95.1% in 2022 (Dauda, 2016; World Bank, 2022). Nigeria’s poverty rate has risen over time. The prevalence of poverty has had a severe impact on the economy, causing great destruction and becoming a barrier to growth and progress. Despite numerous anti-poverty programs and measures to alleviate the issue, Nigeria is dealing with a severe and enduring poverty barrier (Abdussalam et al., 2014; Jaiyeola and Choga, 2021).

Social capital, a potential byproduct of cooperative societies, may have an impact on initiatives to combat poverty and members’ consumption per capita. It can ensure members’ labor-generated funds can be used to address household issues, launch enterprises, pay for their children’s tuition, buy cars, construct homes, and other things (Ringim and Shuaib, 2017). According to Gillinson (2004), social capital is a term used to describe the significance of local networks and how they improve people’s lives by increasing productivity. A flow of future income is produced by the store of common knowledge, standards, guidelines, periodic activity, and expectations carried by such groups (Gatzweiler and Hagedorn, 2002). According to Putnam (2000), social capital consists of interpersonal relationships (in a group setting) and the reciprocity and reliability standards that develop as a result. Social capital in local groups is defined as the active and critical participation of group members in group activities. This type of participation fosters organizational skill, which in turn fosters strength and empowerment—two necessary conditions for taking action (Akpabio, 2005; Farrell and Thirion, 2022).

Organizations with social capital serve both social and economic functions in ensuring their members’ well-being. Many of these organizations are social, while others are economic. If the groups are social, they contribute to the development of social capital. This, among other things, includes the institution’s identity, internal dynamics, participant attitudes, and the values that direct their interactions as a group, all of which aid in the communities’ economic and social growth (Grootaert and Bastelaer, 2002; Demir, 2021). Social components that characterize the culture of some local institutions include the provision of food, healthcare services, credit facilities, and daycare or primary school for members’ children (Herrington and Mix, 2020; Gilbert et al., 2022). Across communities, cooperative organizations, religious groups, mutual association groups, age grade groups, and farmers’ groups flourish. The social capital benefits from these groups generate solutions to issues with the primary production and sale of goods and services, and economic groups are also concerned with their members’ shared interests (Anyiro, 2022).

A growing body of research shows that key factors like growth, equity, and poverty reduction can be influenced by social capital. Associations and institutions with social capital offer a loose structure for managing information exchange, activity coordination, and group decision-making. Growing evidence suggests that social capital contributes to sustainable development through its ability to manage opportunities, risks, and shocks. As a result, it bolsters individuals’ ability to deal with poverty and vulnerability, settle disputes, and share useful knowledge (Malherbe et al., 2020). It also decreases transaction costs, offers contract enforcement, provides access to cash for households with limited credit, encourages the use of new industrial technology, and, perhaps most critically, creates chances for risk sharing (Isham, 2002; Malherbe et al., 2020).

This study focuses on identifying the dimensions of social capital, the level of food consumption expenditure, and the poverty status of rural farming households and the empirical effect of social capital on poverty using consumption expenditure measure. Its outcome is expected to provide a clear insight into the potential of social capital as a viable means to improve the food consumption capacity of the poor. In addition, the recommendations of this study will be helpful to social networking groups, cooperative business societies, and union organizations since they will incorporate numerous strategies to enhance the performance of such institutions.

Social capital as a concept highlights the values of cooperation and group action, solidarity and trust, and networks of lateral connections between and among households, groups, and communities. In the view of Grootaert (2001), the concept of social capital covers social ties, networks, socio-cultural norms, and values that promote interaction between individuals and groups. Consequently, this capital enhances the socioeconomic prosperity of its beneficiaries. The definition of social capital by the World Bank (2008) as the institutions, standards, and connections that influence social interactions both in quality and quantity explains the relevance of the subject to the improvement of human lives (Putman, 2001; Rivera et al., 2019). The main benefits derived from social capital, as identified by Sofoluwe et al. (2021), are associated with positive economic outcomes that are determined by different factors. In most rural communities, especially in developing nations, social capital is a vital source of support for the improvement of the economic activities of local people (Dijkhof, 2019).

To operationalize social capital, a measurement approach is suggested (World Bank, 2004; Roslan and Russayani, 2010). The relevant measure was preliminarily divided into seven factors by Grootaert and Bastelaer, 2002), including membership of association in terms of numbers, extent of group heterogeneity, attendance at meetings, participation index, level or degree of informality of groups and association, financial contribution scores and community initiation. These factors emphasize association or group activity, membership and participation as substantial elements of social capital. Subsequent work by Grootaert et al. (2004) suggested six areas for the measurement and assessment of social capital, namely cooperation and collective action, trust and solidarity, social inclusion and cohesion, groups and networks, information communication, and political action with empowerment. This latter form of assessment has been widely adopted by researchers in the area of social capital (Roslan and Russayani, 2010; Sofoluwe et al., 2021). Nonetheless, the practical benefits of social capital lie in its utilization to reduce widespread poverty among people in rural areas.

Theoretically, social capital concepts are situated in social capital theory. This theory is premised on the principle that social capital encompasses economic advantages, trust, network size and diversity, and the demographic composition of individuals in the social capital framework. Hence, the theory is built upon the principles of economic advantage, trust, the size of networks, the diversity of networks, and the demographic composition of members within associations. As espoused by Putnam (2004), since the theory of social capital is rooted in providing short- and medium-term advantages to individuals, households and community groups, its application to social welfare, especially poverty status and consumption patterns, merits scrutiny. But, in spite of the anticipated contribution of social capital to boosting the economic conditions of the rural populace, limited empirical studies exist on the dimensions of social capital and its contribution to rural poverty reduction through improvement of the consumption patterns of the poor.

The challenges facing the poor constitute a subject of interest in poverty analysis. Poverty affects the well-being of the people, and social capital may be a variable of interest to those seeking to reduce poverty (Ishise and Sawada, 2009; Imandoust, 2011; Ernan and Ahmadriswan, 2017). Dijkhof (2019) argued that social capital exerts a positive effect on poverty reduction, although the beneficiaries of such capital are not clearly determined.

In recent times, empirical studies have focused on different aspects of social capital and different categories of people using different methodological approaches. Osei and Zhuang (2020) analyzed an empirical connection between social capital, entrepreneurship, and women that could help to reduce poverty in rural areas. The outcomes of the study, which used Structural Equation Modelling (SEM), indicate that significant and positive relationships exist among social capital factors, female entrepreneurship and poverty. However, the magnitude of the contribution of social capital to poverty appears unclear. The previous study of Sofoluwe et al. (2021) was limited to highlighting the factors involved in social capital acquisition. While the identification of the factors that determine social capital is crucial, the empirical consequences of social capital for the poor, and specifically for consumption smoothing among the poor, also need to be understood. Furthermore, it is not sufficient to determine the factors influencing any livelihood-dependent factor without estimating its potential benefit. In Vietnam, Pham and Mukhopadhaya (2022) evaluated rural poverty, examining various dimensions of poverty across the areas of health, finance, housing and durable assets. However, their study focused on heterogeneous groups with varying consumption capacity, making it difficult to draw policy conclusions from the results. In addition, household characteristics are not considered important factors for the poverty status of individuals. The earlier study of Ringim and Shuaib (2017) analyzed the empirical connection between social capital, consumption, income and poverty. Their findings suggest that social capital improves consumption through educational attainment.

The study was carried out in rural communities in Oyo state, southwestern Nigeria, at latitude 7.85257°N and longitude 3.93125°E. The area has an equatorial climate with both wet and dry seasons and high humidity. Agrarian activities predominate in the area, with abundant production of various crops, including yam tubers, cassava, mangoes, cashews, palm kernels, corn, millet, melon, tomatoes, okra, and cocoa. The study sample was chosen from agrarian households in a predominantly rural area. A multistage sample process was chosen. This process generated a total of one hundred and fifty responses that could be used in the analysis. Subsequently, five localities were selected based on the concentration of farming activities: Ayete, Igangan, Tapa, Igboora, and Idere. The sampling process continued with a random selection of thirty (30) rural farming households from each of the identified localities. The data collected was primary and the information was gathered using a structured questionnaire. In the five locations selected, professional enumerators were employed as assistants in the data collection process. The collection of the data occurred during the summer of 2023, during the months of May and August. The data was analyzed using descriptive statistics, the Foster, Greer and Thorbecke (FGT) poverty index, and the Tobit regression model. The FGT index was used to analyze the incidence, depth, and severity of poverty, while the Tobit model was used to analyze the effect of social capital on poverty using the proxy of the consumption expenditure of the sampled households.

The FGT index is calculated using the formula: (1) Pα=1N∑i=1qz−yiαz \[{P_\alpha } = {1 \over N}\sum\nolimits_{i = 1}^q {{{{{\left( {z - {y_i}} \right)}^\alpha }} \over z}} \] where y_i

consumption expenditure of the i^th farming household

Specifically, the FGT indices for incidence, depth and severity are: (2) P0=1N∑i=1qz−yi0z \[{P_0} = {1 \over N}\sum\nolimits_{i = 1}^q {{{{{\left( {z - {y_i}} \right)}^0}} \over z}} \] (3) P1=1N∑i=1qz−yi1z \[{P_1} = {1 \over N}\sum\nolimits_{i = 1}^q {{{{{\left( {z - {y_i}} \right)}^1}} \over z}} \] (4) P2=1N∑i=1qz−yi2z \[{P_2} = {1 \over N}\sum\nolimits_{i = 1}^q {{{{{\left( {z - {y_i}} \right)}^2}} \over z}} \]

To examine the empirical effect of exogenous factors on the likelihood of being poor, a Tobit regression model was specified. The model was originally developed by Tobin (1958) as a consumption model for consumer durables in which expenditure is censored at zero. Mathematically, the model is written as: (5) Y=αi+βXi+εi \[Y = {\alpha _i} + \beta {X_i} + {\varepsilon _i}\] where Y_i

dependent variable (logarithm of consumption expenditure)

The specification of the observed result for the i^th observation is written as: yi*=yi if a<yi<ba if yi≤ab if yi≥b \[y_i^* = \left\{ {\matrix{ {{y_i}\,if\,a< {y_i}< b} \cr {a\,if\,{y_i} \le a} \cr {b\,if\,{y_i} \ge b} \cr } } \right.\] where a and b are the censoring limits at the lower and upper levels, respectively, and y represents the censored outcome.

The prevalence of poverty necessitates the application of different approaches to improve the overall well-being of the poor. This study examines the role of social capital in shaping the conditions of the poor. The consumption capacity of rural people is considered crucial in determining their poverty status. The findings of the study suggest that social capital exists in various forms: participation in group or association activities, groups and networks such as cooperative organizations and mutual trust among people. The results show that the consumption expenditure of most rural people is relatively low, thereby exposing them to a high incidence, depth and severity of poverty. Most of the respondents in the sample live on an average of less than $2 equivalent per day. The incidence of poverty is higher among people in the age bracket 41–50 years and among people above 60 years of age. The results therefore suggest that it is necessary to protect people aged above 60. The results demonstrate the significant role of education in poverty reduction among the rural poor. Educated people were found to have a lower incidence, depth and severity of poverty. Social capital exerts a statistically significant effect on poverty through people’s involvement in group and association activities and decision processes. This is consistent with the finding of Olaleye et al. (2020) that social capital can be a poverty-reducing asset for the most vulnerable in a society. This study was limited by its focus on rural areas, as poverty knows no boundaries in modern times and in most developing nations.