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Blame game, accusations as e-mandate fails to halt soaring unclaimed dividends

Lamido Yuguda

Unclaimed dividends have continued to rise despite the introduction of the e-dividend mandate by the Security Exchange Commission to address the challenge. OLUWAKEMI ABIMBOLA writes on why the challenge of unclaimed dividends persists

The issue of unclaimed dividends often dominates discussions at Annual General Meetings of listed companies. Investors would always call on the regulator of the stock exchange, the Security Exchange Commission, to devise ways of reducing the rising volume of unclaimed dividends. So, when SEC in 2015 introduced the e-dividend mandate which allows quoted companies to dividends directly into shareholders’ bank accounts, investors heaved a sigh of relief. They believed the challenge of unclaimed dividends would soon be a thing of the past.

However, investors’ expectations of the e-mandate have been dashed, as seven years after its introduction, unclaimed dividends have continued to soar.

Last year, SEC declared that the total value of unclaimed dividends in the country rose to N177bn in 2021 from N168bn in the prior year. The figure was N158.44 billion in 2019.

The value of unclaimed soared by a whopping 8,369 per cent from N2.09 billion in 1999 to N177bn in 2021. And it went up by 96.67 per cent from N90bn in 2015, when the e-dividend mandate was introduced by SEC, to N177bn in 2021.

Although the figure for 2022 is currently unavailable, some listed companies that have released their financial statements for the year have reported an increase in their unclaimed dividends.

In the financial services sector, Stanbic IBTC Holdings’ unclaimed dividend was up by 16.38 per cent in 2022 to N4.12bn, compared to N3.54bn in the previous year.

For BUA Cement, it was up 45.25 per cent to N689.54m in 2022 from N474.74m in the prior year.

However, Dangote Cement is among the few companies that have succeeded in trimming down their unclaimed dividends. It was down marginally by 4.35 per cent to N4.4bn last year from N4.6bn in 2021.

Nestle also cut it by 9.29 per cent to N2.54bn last year from N2.8bn in 2021.

Meanwhile, Investors have blamed registrars of listed companies are responsible for the rising unclaimed dividends. They claimed the newly-introduced Unclaimed Dividend Trust Fund has not also helped matters.

In a section of the 2020 Finance Act, the Federal Government proposed the establishment of a trust fund where unclaimed dividends would be used to finance some government projects.

In April 2022, the Director General of SEC, Lamido Yuguda, during a virtual post-Capital Market Committee meeting disclosed that the dividends have finally been moved to the trust fund, which is managed by SEC and the Debt Management Office.

The Coordinator of the Independent Shareholders Association of Nigeria, Moses Igbrude, in a chat with our correspondent stated that the issue of unclaimed dividends was a major one in the capital market and was unlikely to end due to the “vested interest” of the government.

He said, “FG has created a trust fund to use the unclaimed dividends. Imagine some new companies having unclaimed dividends, there is something fundamentally wrong with the process.”

Praising and dissing the market regulator, the National Chairman, of the Progressives Shareholders Association of Nigeria, Boniface Okezie, stated that while the e-dividend mandate policy had helped, there were still bottlenecks that the SEC needs to clear up.

“A lot of professionals, who invested over the years, are not finding it necessary to send their names, and current addresses to regularise those things or fill the e-dividend mandate form, to embrace it.

“They are yet to send their names to registrars to capture, so these are problems. And until they do that, the issue of unclaimed dividends will continue to be there and continue to be on the increase.”

Okezie suggested that the government should use the interest generated from monies in the Unclaimed Dividend Trust Fund for investor education.

He said, “That money is in the custody of SEC. They are not doing much. Even if it is the interest earned on these monies, you should be able to deploy them towards enlightenment of the public for the need to embrace this (e-dividend mandate). It will go a long way to reduce unclaimed dividends.”

According to him, the SEC is not doing much in terms of creating awareness about the e-dividend mandate.

Taking a swipe at registrars, the National Coordinator of the Pragmatic Shareholders Association of Nigeria, Bisi Bakare, asserted that the registrars were frustrating the shareholders.

She said, “The introduction of e-dividend should have led to a faster reduction from what it is now.

“For instance, with some big companies, when you look at their unclaimed dividends, it is on the high side and it is not as if all of them with unclaimed dividends are dead. Some of them are still alive. The registrars on their own, still need a lot of training on how they relate to shareholders.”

While she expressed her opposition to the Unclaimed Dividend Trust Fund, Bakare said that the fund cannot be blamed for the increase in unclaimed dividends.

She said, “I am against the Unclaimed Dividend Trust Fund but shareholders cannot say it is because the government has taken over the money that is why we are having such a huge amount of unclaimed dividend. That is not true. The Unclaimed Dividend Trust Fund is not up to two years. This issue has been in existence for over 30 years.”

To address some of the challenges faced by investors in claiming their dividends, stakeholders have said that the SEC needs to penalise some registrars and also encouraged them to be proactive about investor education.

Bakare called on the SEC to sanction registrars accused of frustrating shareholders from accessing their dividends.

She said, “Unclaimed dividends can never be eradicated in Nigeria except SEC penalise registrars. It will take SEC to go through the registrar’s register and ask questions. The company has paid the dividend. It is now left for the registrar to pay the owner of the money.  You will go to the registrar, fill out forms and despite that, they will hold your money.

“Except SEC penalises registrars with high unclaimed dividends, that is when all these things will stop.”

The Managing Director of Highcap Securities, David Adonri, averred, “That is an issue that is bothering a lot of market operators. The level of cooperation that investors are getting from the registrars is below expectations.

“The registrars are complicit in the accumulation of those unclaimed dividends because they were feeding fat. It is, therefore, not surprising that they are frustrating the process. Because even when investors have filled out their e-dividend mandate form and have submitted it through their banks or online or directly to their registrars, the registrars still fail to mandate the account and pay dividends directly to the bank accounts. It is still a thorny issue and I don’t know why SEC is not penalising registrars frustrating this exercise.”

On the Unclaimed Dividend Trust Fund, Adonri said that it was not peculiar to Nigeria and that when dividends were declared, the government is in a position to be able to administer unclaimed funds.

He said, “In Nigerian, the Finance Act of 2020, was what changed the management of the unclaimed dividend, removing it from the hands of the companies and their registrars to the trust fund. Before then the companies were not eager to arrest the growth of the unclaimed dividends because they were the primary beneficiaries of the unclaimed dividends. There are instances where they were even complicit in ensuring that the unclaimed dividends remain unclaimed.

“Generally, therefore, companies will not be happy that the government has taken over. The companies and the registrars were feeding fat on those unclaimed dividends.  I believe that once dividends are proposed and issued by the company, they no longer belong to the company. They belong to the public and the government is in a better position to redistribute that wealth to the general public much more than companies will do.”

The President of the Institute of Capital Market Registrars, Oluseyi Owoturo, denied the allegations of complicity of registrars in the rising unclaimed dividend.

Owoturo asked, “Have they audited the registrars before? Have they audited the books of the registrars before? How did they come to the conclusion that registrars are complicit? The shareholders talking, do they have unclaimed dividends? If they have unclaimed dividends, why have they not reported the specific registrars to SEC? Have they written to SEC, who is the regulator?

“Every year, when the company declares dividends, almost 400,000 if not more cannot be paid. The dividend belonging to those 400,000 goes to add to the unclaimed dividends. Now, if those 400,000 people come forward and mandate their account, they will be paid but if they don’t come forward, how is the registrar supposed to pay them?”

He argued that those blaming registrars for the rising unclaimed dividends were conjuring ideas without understanding the fundamentals.

There are some people there for whatever reasons, they have just not done anything.

“There are all sorts of reasons for unclaimed dividends. Somebody cannot sit down somewhere and say that registrars are complicit. Is it that they went to the registrar and the registrar refused to pay them? If the registrar refused to pay them, why are they not reporting those registrars? We have an institute. If they report the registrar to the institute, I am the president of the institute, the institute will take it up.

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