This paper models the economic and hydrological impacts of upstream water diversion on downstream floodplain activities. The model is illustrated and applied to the example of the Hadejia-Jama'are River Basin, northern Nigeria. Full implementation of all the upstream dams and large-scale irrigation schemes in the river basin would produce losses of US$20.2--20.9 million in present value terms in terms of flooplain agriculture, forestry, and fishing. The associated annual losses from declining groundwater levels in surrounding areas would be around $1.2 million for tube well irrigation and $4.76 million for domestic water consumption. The introduction of a regulated flooding regime for upstream dams would probably protect the groundwater recharge function of the downstream floodplain and reduce substantially the losses to agriculture, forestry, and fishing to around $15.4--16.5 million.