Assessing the Technical Efficiency of Electricity Distribution Companies in Nigeria: The Bootstrapped Data Envelopment Analysis (BDEA) Approach

Abstract

The privatization and support of government for the Nigerian Electricity Distribution Companies (DisCos), were aimed at improving their performance in terms of availability and reliability of electricity supply. This, however, appears to be unrealistic, raising doubts on the technical efficiency of the sector. It is on the basis of this, therefore, that this study assessed the technical efficiency (TE) of Nigerian DisCos and their drivers. Data on the 11 DisCos were obtained from 2014-2021 and analysed by applying the bootstrap technique to the Data Envelopment Analysis (DEA) in order to resolve the stochastic challenge associated with the previous studies, which might be bias hence giving misleading results. The analysis was done in two stages. At stage one, the TE scores were obtained under both constant and variable returns to scale technology assumptions while at stage two, the impact of the environmental factors were measured on TE scores using truncated regression method. The results showed that, on average, DisCos are both technically and scale inefficient. Among others, the second stage result showed that customer metering has significantly negative impact on DisCos’ efficiency while DisCos located in the north are about 4.9% more likely to be inefficient compared to their southern counterparts. However, customer density and subsidy were insignificant. As a consequence, the following recommendations are made: that massive investments be made in technology to automate processes and reduce the operational costs, hence boost technical efficiency. Also, that government halts its subsidy payment pending its proper impact assessment.