A Study of the Allocative Efficiency of Quoted Manufacturing Companies in Nigeria

The objective of the study is to examine whether quoted manufacturing companies in Nigeria are allocating their available resources efficiently. In pursuance of this, the study adopted the output orientated DEA model with four input and output variables. The input variables are total asset, shareholder’s equity, cost of goods sold and operating expenses while the output variables are sales/turnover, net profit, return on asset, and return on equity. An output orientated DEAP Version 2.1 package was employed for the analysis. The method assumes variable return to scale assumption using multi-stage DEA. The result revealed that there was inefficient allocation of resources with the presence of high slacks for the input variables: total asset (114%), shareholder’s equity (77%), cost of goods sold (47%) and operating expenses (71%) in the production process of quoted manufacturing companies in Nigeria. Given their high input slack, it is recommended that total asset and shareholder’s equity should be depleted from their current allocations, and such resources be shifted to alternative production activities.