Limited access to credit and low levels of income diversification continue to pose challenges to the sustainability and financial resilience of poultry farming in Nigeria. This study investigated the extent to which income diversification influences loan repayment performance among poultry farmers in Southwest Nigeria. A two-stage sampling procedure was used to select 272 respondents, and data were gathered through a structured questionnaire. The analysis employed descriptive statistics, cost and returns analysis, a loan repayment index, Simpson’s Index of Diversity, and Tobit Regression. Findings showed generally low levels of income diversification, with 61% of farmers recording a diversification index below 0.3. Poultry production remained the major livelihood activity, contributing 61% of the mean annual income (₦23,907,653.52). Only 40% of the respondents accessed formal loans, and their loan repayment index stood at 68.0. Profitability analysis revealed that farmers earned ₦0.23 for every ₦1 invested, while feed alone accounted for 84.59% of total production costs. Results further indicated that higher income diversification improved loan repayment performance, whereas limited diversification constrained repayment ability. The study underscores the need for enhanced credit support, efficient input supply, and targeted capacity-building interventions to strengthen diversification, profitability, and repayment outcomes in the poultry sector.