This paper investigates the impact of political uncertainty on the cash holding decisions of non-financial firms listed on the Nigerian Exchange Group (NGX) from 2015 to 2024. Utilizing a panel dataset of 152 firms and measures of political uncertainty based on election cycles and a policy uncertainty index, the study finds robust evidence that firms significantly increase their cash reserves in response to heightened political uncertainty. This effect persists after controlling for firm size, profitability, leverage, liquidity, and other established determinants of cash policy. The findings suggest that Nigerian firms prioritize the precautionary motive for cash holdings, acting as a buffer against potential policy shifts, economic disruptions, and contracting risks associated with the political environment. The study contributes to the limited literature on political risk and corporate finance in emerging African economies.
Onipe Adabenege Yahaya (Fri,) studied this question.