A Nigerian company should hold enough cash to cover about three months of operating costs, plus the debt repayments and taxes due in that window, and put the surplus to work. How much cash a Nigerian company should hold matters more now because inflation is 15.39% and a balance that earns nothing loses buying power every month.
The rule is simple. Applying it takes more care, and the country's largest listed companies show why.
How much cash are Nigeria's biggest companies holding?
Nairametrics ranked the ten listed companies with the most cash at H1 2026. Together they hold ₦3.65 trillion, up 58.10% from ₦2.31 trillion a year earlier. Dangote Cement holds ₦796.28 billion, double the ₦397.57 billion it had at the end of 2025. BUA Foods grew its balance by 165.27%.
Others went the other way. MTN Nigeria's cash fell 27.44% to ₦458.93 billion as it spent on capital projects, and Presco's fell 53.57% to ₦129.86 billion. Same table, opposite behaviour. A big balance is not wrong and a small one is not reckless. The test is whether the money has a job.
What does idle cash cost in 2026?
Headline inflation was 15.39% in August, per the National Bureau of Statistics. Cash in a current account loses about that share of its buying power over a year. On ₦500 million, that is roughly ₦77 million of value gone.
The CBN has also cut its policy rate by 350 basis points to 23%, the biggest cut since 2006. Credit gets cheaper, so a credit line costs less to draw on, and a smaller cash buffer is easier to defend. We covered the borrowing side in our note on the CBN rate cut.
How do you size your cash buffer?
1. Total your monthly cash costs. Payroll, rent, suppliers, fuel and loan service. Leave out depreciation, which needs no cash.
2. List known obligations for the next 90 days. VAT and PAYE remittances, company income tax instalments and loan repayments.
3. Multiply monthly costs by three, then add the obligations. That is your floor. Firms paid in tranches, such as construction contractors and NGOs, should use four to six months.
4. Compare the floor with your actual balance. Surplus goes to work: repay your most expensive debt first, then fund planned stock or capex, then short-dated instruments you can reach quickly.
A worked example (illustrative). Monthly cash costs are ₦150 million and ₦90 million of tax and loan payments fall due next quarter. The floor is 3 x ₦150 million + ₦90 million = ₦540 million. A company holding ₦900 million has ₦360 million of surplus.
Why does the cash conversion cycle matter more than the balance?
The balance is a snapshot. The cash conversion cycle shows how fast it refills. Add days of inventory to days of receivables, then take away days of payables. A firm that collects in 90 days and pays suppliers in 30 needs a far bigger buffer than one that collects in 30.
Cutting receivable days from 90 to 60 on ₦1.2 billion of annual sales frees about ₦99 million. That is often cheaper than any loan.
What does this mean for your business?
Set a written cash floor this month and review it every quarter. Keep tax cash in a separate account so VAT, PAYE and company income tax are never funded from the operating balance.
Construction firms and NGOs, which receive money in tranches, should hold four to six months. Trading and shipping firms with short collection cycles can usually run on three. If your balance is far above your floor, decide what it is for. If you cannot say, it is surplus.
FAQ
How many months of cash should a Nigerian SME hold?
Our working rule is three months of operating costs plus obligations due in that period. Businesses paid in tranches or with seasonal income should hold four to six months.
Is holding a large cash balance a mistake?
Not by itself. It becomes costly when the balance has no purpose and inflation erodes it. Set a target, name what the excess is for, and review it each quarter.
Where should surplus cash go?
Repay your most expensive debt first, fund planned stock or capex next, then use short-dated instruments you can access within your buffer horizon. Our post on parking idle cash in treasury bills sets out the trade-offs.
Need a cash policy, a 13-week cash flow forecast or a working capital review? Contact VOG Global in Area 10, Garki, Abuja, or visit vog.global, and we will set it up with you.