Irrigation pumps and milling machines as insurance against rainfall and price risks in Nigeria
"This research examines whether the effect of financial assistance was greater in regions with higher rainfall and market price risks. We characterize rainfall and price risks by computing the coefficient of variations of annual rainfall and gari prices from regional time-series data. Through this analysis, each region is characterized by levels of rainfall and gari price risks. We estimate the marginal effect of financial assistance on investments, taking into account that effects vary based on the magnitude of those risks. We analyze panel data on investment behavior of Nigerian farmers who received financial assistance for acquiring productive assets. The empirical results show that farmers facing higher rainfall risks are more likely to invest in irrigation pumps that can mitigate the impact of poor rainfall. Similarly, farmers facing the higher price fluctuations for unmilled cassava (gari) are more likely to invest in milling machines that enable them to sell milled cassava, an alternative cassava product with a more stable price."