Examination of ‘Fugaz’ International Banks’ Performance Efficiency in Nigeria: A Data Envelopment Analysis Approach

Abstract

The aim of this paper is to assess the relative performance efficiency of leading international banks listed in Nigerian exchange ltd using the data envelopment analysis (DEA) technique. The selection of inputs and outputs plays a key role when applying DEA for assessing the efficiency of decision –making units (DMUs). In the conducted research inputs and outputs were selected. the sample consisted of five (5) international banks (viz. First Bank Holding Plc, United Bank of Africa Plc, Guarantee Trust Bank Plc, Access Bank Plc and Zenith Bank Plc, popularly known as “FUGAZ” international banks the five biggest banks by capital based listed in Nigerian Exchange Limited and the period that is being observed is five year span from 2017 to 2021. According to the average efficiency score for the whole observed period, all the FUGAZ are relatively efficient international banks and the average overall efficiency score is 94%. Technical inefficiency was the major source of inefficiency which calls for managerial development in order to scale up the efficiency levels in the area of interest income, interest received from loans and advances, interest expense and interest paid on customers’ deposit. The average inefficiency of the FUGAZ international banks under the constant returns to scale to scale model could be attributed to the excess of customers deposits on the balance sheets of the banks and the need for the FUGAZ banks to step up efforts in area of reducing interest expense impairment loss on the financial assets and other financial assets, depreciation charges, amortization charge, fees and commission expense and administration and operating expenses