An Empirical Analysis of Production Efficiency in Small and Medium Enterprises in the Manufacturing Sector of Onitsha, Anambra State

Small and medium enterprises (SMEs) in the Onitsha industrial cluster of Anambra State, South East Nigeria, constitute a vital engine of manufacturing employment and economic diversification, yet production efficiency levels remain substantially below potential due to technological, managerial, and infrastructural constraints. This study empirically analyses production efficiency among 85 manufacturing SMEs in Onitsha using Data Envelopment Analysis (DEA) and stochastic frontier analysis (SFA). Data on input quantities (labour, capital, energy, raw materials) and output values are collected through structured questionnaires and verified against financial statements. DEA models under both constant and variable returns to scale are estimated to compute technical and scale efficiency scores. SFA decomposes total technical inefficiency into pure technical inefficiency and noise components. Results indicate mean technical efficiency of 0.64 under the variable returns to scale assumption, indicating that sampled firms produce 36 percent less output than the frontier benchmark given their input levels. Scale inefficiency accounts for 19 percent of total inefficiency. Tobit regression analysis of efficiency determinants identifies technology adoption, manager educational attainment, access to credit, and years of operation as statistically significant positive predictors of efficiency. Energy unreliability is associated with a significant negative efficiency effect. Recommendations include targeted technology upgrade subsidies, credit guarantee schemes, and investment in industrial estate electricity infrastructure. This study fills an empirical gap in SME production efficiency analysis in South East Nigeria. Keywords: production efficiency, DEA, SMEs, Onitsha, stochastic frontier analysis