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he paper examines the effect of cash holdings on the performance of firms in Nigeria over the period 2001-2012. The study adopts the generalized method of moments in analyzing the data. The results of the estimation show that cash holdings has significant positive impact on firm performance. In addition, the results reveal that cash flows, growth opportunities, size, and net working capital exert negative impact on firm’s performance, while debt repayment is positively related to firm’s performance. This clearly shows that a good financial performance of the firm is an outcome of vast corporate cash holdings. It reflects the beliefs if Nigerian firms’ managers that the absence of effective liquidity management will cause cash shortages and will result in difficulties in paying obligations, which negatively affects the firms’ profitability.