EFFICIENCY OF DEPOSIT MONEY BANKS IN NIGERIA: DATA ENVELOPMENT ANALYSIS APPROACH

Abstract

In today’s turbulent and competitive operating environment, the survival of banks depends on the efficient use of scarce resources. This study examines the efficiency of ten (10) selected banks in Nigeria for the period of five (5) years (2016 to 2020). The efficiency measures of constant return to scale (CRS), variable return to scale (VRS) and return to scale (RTS) were employed using the Data Envelopment Analysis (DEA) approach. The findings from empirical analysis show that only five banks, Guarantee Trust Bank (GTB), First City Monument Bank (FCMB,) Access bank, Union bank and Sterling bank were significantly efficient in Nigeria with respect to CRS and VRS for the period considered. However, all the banks were significantly efficient in the long run with respect to RTS. Therefore, the study recommends that the less efficient banks should study and understand the strategies adopted by the efficient banks. The study also recommends that investors/shareholders should invest more on the efficient banks such as GTB, FCMB, Access bank, Union bank and Sterling bank. Again, the study recommends that the inefficient banks like ZENITH, FIRST BANK, UBA and WEMA should be encouraged to focus more on long term project and explore ways to be more operationally efficient and move towards innovation. Regulatory authorities should ensure strict compliance to resources management policies.