authors
Chijioke Okoro, Adebayo Tunde and Maryam Bello

abstract
Price instability in agricultural input and output markets has become a significant challenge for non-farm households, especially in developing regions like the Federal Capital Territory (FCT) of Nigeria. This study investigates the impact of price fluctuations on non-farm households in the FCT and explores the hedging strategies they adopt to mitigate the risks associated with these price volatilities. The research employed a mixed-methods approach, combining primary data from a structured survey of 300 non-farm households with secondary data from local market reports and government publications. The findings indicate that non-farm households face considerable price instability, with agricultural input prices, such as seeds, fertilizers, and labor, increasing by an average of 25% over the last five years. Output prices for crops and livestock showed even higher price instability, with price changes ranging from 30% to 50%. In response to these fluctuations, households primarily relied on income diversification as the most common hedging strategy, with 68% of households reporting its use. However, the study found that only 15% of households utilized formal hedging mechanisms like crop insurance or futures contracts. Logistic regression analysis revealed that higher income levels, education, and access to financial services significantly increased the likelihood of adopting formal hedging strategies. Barriers to adopting formal financial tools, such as lack of awareness, high premiums, and limited access to financial products, were identified as key constraints. The study recommends enhancing financial inclusion, improving financial literacy, and designing affordable insurance schemes tailored to rural households to strengthen their resilience to price instability.