Abstract
This paper analyzes efficiency levels in Nigerian airports using a stochastic frontier model that captures the impact of unobserved managerial ability during the period 2003–2014 based on the methodology presented in Alvarez et al. (2004) – the AAG model. Managerial ability in Nigerian airports is an important issue for sustaining efficiency levels because they are labor intensive rather than capital-intensive facilities. The AAG model was modified in this research to measure two exogenous contextual variables, namely regulation and hub. Under this modified version of the AAG model, inputs and outputs are disentangled in the frontier estimate while simultaneously allowing these contextual variables to control the impacts of managerial ability on efficiency. Results not only suggest that variations in efficiency scores are more sensitive to labor than to capital costs, but also indicate a negative impact of regulation and hub operations on efficiency levels possibly due to the small operational scale of Nigerian airports. Policy implications are derived.
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