Influence of Political Uncertainty on Investor Confidence in the Nigerian Stock Market

Political uncertainty has become a significant factor affecting investment decisions and market performance in emerging economies. This study empirically investigates the influence of political uncertainty on investor confidence in the Nigerian Stock Market, focusing on the specific dimensions of electoral uncertainty, policy instability, governance quality, and institutional credibility. Drawing on the Efficient Market Hypothesis, Behavioral Finance Theory, and Institutional Theory, the research posits that these political uncertainty dimensions significantly impact investor confidence. A survey research design was employed, collecting data from 312 investors, fund managers, and financial analysts operating in the Nigerian capital market. Data were analyzed using descriptive statistics, Pearson Product-Moment Correlation, and Multiple Regression Analysis. The findings reveal that all four independent variables, electoral uncertainty, policy instability, governance quality, and institutional credibility, are significant predictors of investor confidence. Specifically, governance quality emerged as the strongest positive predictor of investor confidence (β=0.485, p<0.001), while electoral uncertainty showed the strongest negative impact (β=-0.420, p<0.001). The regression model explained a substantial portion of the variance in investor confidence (R²=0.742). This study concludes that while political uncertainty significantly undermines investor confidence in Nigeria, the strength of governance institutions and policy stability can mitigate these negative effects. The results reinforce the theoretical frameworks, suggesting that improving political stability and institutional quality can enhance investor confidence and capital market development. Recommendations include strengthening democratic institutions, ensuring policy continuity across political transitions, and enhancing transparency in governance processes.