Abstract

The study examines market efficiency and volatility using the data envelopment analysis (DEA) approach and the GARCH model. The study focused on twelve (12) deposit money banks listed on the Nigerian Stock Market for the period 2019 to 2022. The input variables were total equity (TEQTY) and total liabilities (TLIAB); while the output variables were total loans (TLOAN) and net profits (NPRO) respectively. The empirical findings generally indicate that, under the constant return to scale (CRS), Stanbic IBTC Bank and First Bank of Nigeria are the only banks that are technical efficient in terms of using their little equity funds and debt to generate more loans for customers for better returns, thereby enhancing the overall profitability of the banks. On the basis of the variable return to scale, eight (8) of the banks (Zenith Bank of Nigeria, Stanbic IBTC Bank, Guarantee Trust Bank, First City Monument Bank, First Bank of Nigeria, Fidelity Bank, Access Bank and Citibank Nigeria Limited) were found to be technically efficient. However, two (2) of the banks (Stanbic IBTC Bank and First Bank of Nigeria) were observed to be technically efficient both at the constant return to scale and variable return to scale. However, market volatility was not deep nor persists for a long time in the market. The study recommends that deposit money banks in Nigeria should be proactive and endeavour to be more efficient in the use of their meagre equity funds and debts available to them to improve on their additional credit generation thereby increasing the overall profits and performance of the banks.