Household Financial Access and Risk Sharing in Nigeria

We examine the role of household financial access in determining the extent of risksharingin Nigeria using household-level panel data. We estimate changes in the responseof consumption to shocks for households with formal and informal access to finance andthose without, both for the country as a whole and for different regions. Our findingssuggest that households with financial access who experience an unexpected negativeincome shock see consumption fall by 15 percentage points less than those without access.This result is mainly driven by households with informal financial access, and byhousehold savings rather than borrowing. Regional variation in risk sharing tends to besignificant, suggesting that financial inclusion efforts going forward should have a moreregional focus.