Election Cycles and Corporate Investment Decisions in Nigeria

Political risk is among the most underexplored determinants of corporate investment behaviour in sub-Saharan Africa. This study examines the effect of election cycles on corporate investment decisions among non-financial firms listed on the Nigerian Exchange Group (NGX) over the period 2007 to 2023, spanning four general election cycles. Using an unbalanced panel dataset of 100 firms and 1,100 firm-year observations, the study constructs a novel Election Uncertainty Index (EUI) and employs Fixed Effects panel regression augmented with Driscoll-Kraay standard errors to address heteroskedasticity, serial correlation, and cross-sectional dependence. The results reveal that corporate investment declines significantly in election years, with the EUI exerting an independent and economically meaningful negative effect on capital expenditure. Politically connected firms, however, demonstrate a statistically significant capacity to partially offset election-induced investment suppression, lending support to resource dependence and crony capitalism perspectives. Firm profitability, size, and growth opportunities robustly promote investment, while leverage, inflation, and interest rates constrain it. GDP growth exerts a modest but significant positive effect. The findings contribute to the sparse literature on political uncertainty and firm behaviour in African emerging markets and offer actionable policy guidance for regulators, investors, and corporate governance practitioners committed to building investment-resilient institutions in Nigeria.