Past government efforts to reduce rural inequality in Nigeria have not led to appreciable impact due to their supply driven approach. Recently emphasis is now shifting to demand driven approach through Community Driven Development assets (CDD). Fadama II one of the CDD projects invested mainly in agricultural projects to increase the income of the users. However, the impact of Fadama II on Income inequality (IE) has not been fully ascertained. Therefore, the impact of Fadama II on income inequality of rural households in Nigeria was investigated the data for this study were obtained from secondary source through a survey conducted in twelve World Bank supported Fadama states by International Food Policy Research Institute in 2006/2007 farming year. Only 1,738 matched observations from the 3,750 respondents were used in this study. The data were analysed using, propensity score matching; descriptive statistics double difference estimator, and Gini-coefficient. The result shows that across the three agro-ecological zones, annual per capita expenditure increased by 13.8%, 22.9% and 29.1% for HF, MS and DS zones respectively with Taraba state having the highest change in mean income of 28% while the least is Oyo state (3.2%). Fadama II was income inequality (IE) decreasing nationwide (21.2%) with female Fadama Beneficiaries (FB) having the highest reduction of 27.2% compared with male counterparts of 14.1%. The IE reduced by 28.4%, 12.9% and 11.7% in HF, MS and DS. Also across the benefiting states IE reduced with Lagos state having the highest decrease (38.9%) while Adamawa had the least (3.1%). The study recommended that there is need to promote this type of Economic Community Driven Development project in the nation.
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