Empirical Assessment of Manufacturing Companies Efficiency in Nigeria:Data Envelopment Analysis (DEA) Approach

Abstract

This study dwells on data envelopment analysis and industry analysis. The study analyzed the technical efficiency of twenty (20) selected manufacturing companies for the period 2015 to 2016 using input and output oriented data envelopment analysis (DEA) approach. Findings arising from the study indicate that 35% of the quoted sampled manufacturing firms in Nigeria were scale efficient while 65% were scale inefficient in the period observed. Thirty percent (30%) of the manufacturing companies on the basis of constant return to scale (CRS) were technically efficient while 70% of them were technically inefficient in the period observed. Forty percent (40%) of the companies in terms of variable return to scale (VRS) were technically efficient while 60% were not technically efficient in the context of variable return to scale. The study concluded that manufacturing firms in Nigeria are not optimally performing with input and output mix of variables. It is therefore recommended that there is need for them to scale down cost of production through appropriate strategic decisions.

Keywords: Technical efficiency, data envelopment analysis, firm performance