Data Envelopment Analysis Technique (DEA) and Technical Efficiency Performance of Privatized and Non-Privatized Firms in Nigeria

Abstract

This study focused on assessing the impact of privatization on the technical efficiency of Nigeria's manufacturing sector, considering the unique economic, political, and organizational characteristics of Nigeria whether privatized firms perform better under private ownership compared to public ownership. The methodology employed for this assessment was Data Envelopment Analysis (DEA), specifically utilizing the Output-Oriented Variable Returns to Scale (VRS) model. The selection of this model was influenced by its appropriateness for situations where manufacturing firms are undergoing substantial structural changes, such as privatization. The findings suggest an overall positive impact of privatization on technical efficiency, with enhanced performance and resource utilization among privatized firms. The study emphasizes the need for tailored policies and a deep understanding of local conditions when pursuing privatization initiatives, contributing to the international discourse on privatization's implications for economic development and efficiency. The study recommended that given the improved output technical efficiency post-privatization, reducing the size of public enterprises and entrusting them to private management is advisable. This aims to enhance output efficiency, minimize economic resource wastage, alleviate financial burdens on the public sector treasury, and encourage fiscal discipline while removing the constraints hindering profit maximization, the Nigeria government should fight double taxation and unreliable power supply, to encourage industrialization to speed up development in Nigeria. In conclusion, Ultimately, the study aims to inform the Nigerian government's decision-making regarding privatization strategies and their potential impact on the country's manufacturing sector and overall economic well-being.