Various studies have documented the effects of off-farm income on investments in specific agricultural inputs. However, few studies had empirically tested the impacts of specific forms of off-farm income on a combination of agricultural input investments and no study to date exists for Nigeria. Such an analysis can reveal the relative impacts of alternative forms of off-farm income on the investment choices of farmers and, perhaps, the best policy choices to achieve improvements in technologies and inputs that are most limiting in achieving agricultural sector growth. In this study, I use the World Bank's LSMS panel data and a range of econometric models to test the relationship between the three most common types of off-farm income (remittances, off-farm wages and enterprise profit) received by Nigerian households and investments in agricultural input such as seed, fertilizer, land and machinery. Using the Seemingly Unrelated Bivariate Probit regression Model, I empirically find jointness in the decisions to use an agricultural input and work off-farm. Using a multivariate probit regression model, I find off-farm income sources to have significant effects on the use of most agricultural inputs. Furthermore, I find a strong degree of interdependence between alternative agricultural input use decisions. The results suggest that policies that strongly promote off-farm income show promise in improving the use of a portfolio of farm inputs, and should enhance agricultural production amongst Nigeria's farm households.
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