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The Technical Efficiency of Nigerian Banks


  • Frances N. Obafemi

    (Department of Economics, University of Calabar, Calabar, Nigeria)


This study provides an insight into the technical efficiency of Nigerian banks. The Data Envelopment Analysis (DEA) approach was employed to derive the efficiency scores of the various banks. A total of 67 banks, made up of commercial and merchant banks were used for the periods 1984/1985, 1994/1995, 1999/2000, and 2003/2004. This enabled us to investigate the efficiency of these banks pre- and- post liberalization. However, the periods were before the consolidation exercise of the Central Bank of Nigeria (CBN) headed by both Soludo and Sanusi. This enabled us compare the results with the outcome of those consolidation exercises. The result shows that on the average Nigerian banks were not efficient within the periods of study. However, it showed that liberalization improved the efficiency of banks in Nigeria, though the improvement did not last as some of the banks started sliding in efficiency with continued liberalization. This tends to support the consolidation exercises which were actions taken along with the liberalization exercise to save the banks. Furthermore, the study shows that some of the banks that collapsed during the 2006 consolidation exercise had their efficiencies continuously on the decline. Same with some of the banks that were declared problematic by Sanusi. It also showed that privately owned banks were found to be more efficient than publicly owned banks within the period of study. This suggests that continued privatization should be pursued in the banking industry.

Suggested Citation

  • Frances N. Obafemi, 2012. "The Technical Efficiency of Nigerian Banks," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(2), pages 407-420, June.
  • Handle: RePEc:asi:aeafrj:2012:p:407-420

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    References listed on IDEAS

    1. Adolfo Barajas & Natalia Salazar & Roberto Steiner, 1999. "Foreign Investment in Colombia’s Financial Sector," IMF Working Papers 99/150, International Monetary Fund.
    2. VANDEN EECKAUT, Philippe & TULKENS, Henry & JAMAR, Marie-Astrid, 1993. "Cost efficiency in Belgian municipalities," CORE Discussion Papers RP 1033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. David A Grigorian & Vlad Manole, 2006. "Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(3), pages 497-522, September.
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    Cited by:

    1. Sameh Charfeddine Karray & Jamel eddine Chichti, 2013. "Bank Size and Efficiency in Developing Countries: Intermediation Approach versus Value Added Approach and Impact of Non-Traditional Activities," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 593-613, May.
    2. repec:nap:nijefr:2017:p:27-49 is not listed on IDEAS


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