Productivity Dispersion and Sources of Technical Inefficiency in Smallholder Timber Mills in Ogun State, Nigeria

Abstract

The concept of technical efficiency is critical to measuring the firm performance, determining the degree of innovative technology adoption, overall production efficiency and sustainability of livelihood options. Our research evaluates technical efficiencies in the sawmilling sector. Specifically, the main objective of the study was to assess technical efficiency dispersion and determine the significant, firm-specific, factors that cause technical inefficiencies in sawmilling operations. Maximum-likelihood methods are applied in the estimation of the parameters of the model. In the study, panel (3 years) data from 68 sawmills was used in the empirical analysis. The primary decision-maker in the sawmill has an average age of 53years with a mean of 17years of experience in sawmill management. The average operational age of the sawmill is 13years. There were considerable wide variations, at the firm level, in technical efficiencies recorded over the periods. The estimated average technical efficiency of the sampled sawmills for the three years (2007-2009) is 61.9%. The result revealed that the initial efficiency gained in 2007 was not sustained as efficiency dropped in 2009 to 57.9%. The firm specific variables that influence technical efficiencies are owner’s status as timber contractor, ownership of timber trucks, years of experience and age of the manager. The study recommends that technical and management training/workshop should be organized by relevant government agencies to regularly update operators’ knowledge. Import policies should be targeted to encourage acquisition and use of modern sawmilling machines and equipment. Also, public power supply to the sawmill clusters should be improved to reduce the high processing cost associated with the use of diesel powered electricity generation sets.