Benchmarking the operational efficiency of Nigeria seaport terminals using Data Envelopment Analysis (DEA)

PURPOSE: The purpose of this paper is to measure the operational efficiency of Nigerian port terminals after concession using panel data from 2007-2011. The analysis of operational efficiency reveals the sources of inefficiency and suggests ways to over the drawback. DESIGN/METHODOLOGY/APPROACH: The study utilizes quantitative techniques, Data Envelopment Analysis (DEA) models for evaluating and ranking operational efficiency of 6 container and 4 bulk cargo terminals in Nigeria. FINDINGS: The results indicate that the performance of the 6 container and 4 bulk terminals carved out of the six major Nigerian seaports in 2006 after concession is sub-optimal and most are operating at decreasing returns to scale suggesting the potential for significant improvement in throughput to match available resources. The most efficient terminals are located in the Lagos area, Port and Cargo Handling Services (PCHS) for container terminal and Apapa Bulk Terminal Limited (ABTL) for bulk cargo terminals. ORIGINALITY: This paper highlights the policy implications of terminal operators not fully utilizing the resources allocated to them. Using a recognized and well-founded measure of efficiency to benchmark concessioned port terminals is critical to port managers and investors because it is an indication of how well each terminal is doing with reference to other terminals as a proxy for competitiveness. That is why the study goes beyond the partial indicator methods used by ports in developing countries, by attempting to measure the overall operational efficiency emphasizing competitiveness using DEA models. In addition most port efficiency benchmark studies are based on container terminals, DEA is not well known in the bulk cargo sector. In this study we fill the gap by also benchmarking the efficiency of bulk terminals. PRACTICAL IMPLICATIONS: One useful application of this study is that it could help the regulator the Nigeria ports authority (NPA) to publish a ranking of the terminals based on the type of cargo. Such ranking could stimulate public interest on the performance of the terminals, encourage accountability and motivate terminal operators to seek for performance improvement. Lastly, it is expected that managers of inefficient terminals should learn from the practices of their efficient counterparts in order to improve their operations. RESEARCH LIMITATIONS/IMPLICATIONS: The present study has a limitation that may warrant further research. For instance the present research did not put the consumer perspective into consideration. Future studies may use supply chain approach to benchmark the efficiency so as to include effectiveness perspective. Further studies on port terminal efficiency measurement can be undertaking using parametric and econometric methods as a control on the DEA methodology