BY EMEKA EJERE
There are growing concerns among operators that the growth of the Nigeria stock market may be threatened if dividend payout, a major incentive for investment continues to be unattractive to retail investors.
The fears are being expressed against the backdrop of recent revelation that a seeming apathy arising from inflation and bureaucratic processes, has seen over 300,000 shareholders of 10 blue-chip firms failing to claim their dividends in the last five years, despite growing need for additional income.
Unclaimed dividends are declared interest/redemption amount distributed by a company to its share/debenture-holders, which remains unclaimed and get accumulated with the company over the years. The Securities and Exchange Commission (SEC) recently declared that unclaimed dividends were rising and are currently in excess of N170 billion.
The Companies and Allied Matters Act (CAMA) 1990 (revised 2020) refers to ‘unclaimed dividends’ as dividends not claimed within six months after a declaration, and are returned to the company, from where the investors can make claims up till, but not later than 12 years. The federal government had proclaimed that any dividend not claimed after 12 years becomes statute-barred and will be forfeited.
Operators are of the view that since inflation is the root cause of the situation, macro-economic policies of the government that will grow the economy and subdue inflation will save the nation’s economy from the impending crisis.
Data from the National Bureau of Statistics (NBS) showed that Nigeria’s inflation rate in the month of August 2021 dropped to 17.01 per cent from 17.38 per cent recorded in July 2021, though economists have dismissed the figures, describing them as far from the prevailing realities.
A look at the unclaimed dividend list of companies quoted on the Nigerian Exchange Limited (NGX) across sectors since the global financial crisis of 2009 showed that Total Plc’s list has 9,750 shareholders covering 50 pages in its unclaimed dividend list, while FBN Holdings list is made up of 255,486 shareholders.
Nestle Plc’s unclaimed dividend list has names of 17,206 shareholders, while Nigerian Breweries has 100,000 shareholders on its list. Dangote Cement’s unclaimed dividends outstanding as of December 31, 2020, were N4.0 billion compared with N3.5 billion as of December 31, 2019.
There are 7,050 shareholders covering 282 pages on Unilever’s list while Okomu Oil and Cutix constitute 4,873 and 7457 shareholders covering 237 and 208 pages respectively. UAC’s unclaimed dividend list stood at 3,331. For Julius Berger and Dangote Sugar Refinery, 2,173 and 10,279 shareholders made up their unclaimed dividend list. Guinness and GlaxoSmithKline lists are made up of 45,324 and 2,835 shareholders respectively.
There is no gainsaying the rising incidence of unclaimed dividends has left regulatory authorities, company executives, registrars of companies, and the general public very worried, especially considering the measures so far put in place by SEC to reverse the trend.
According to reports the SEC, within a period of nine years (between 1999 and 2008), the value of unclaimed dividends rose by 756.46 per cent, resulting in a yearly average of 84.05 per cent.
The SEC quarterly report puts the value of unclaimed dividends as at December 2010 at N37 billion. The top five companies that made up the figure within the period included: Union Bank plc, First Bank, Access Bank Plc, GTBankPlc and Intercontinental Bank Plc with N12,200,330,118.80, N4,955,377,734.18 N3,779,661,895.12 , N3,371,590,767.98 and N2,947,724,640.01 respectively.
The figure increased to N52.2 billion in 2011 and this grew one year later to N60 billion as at December 2012 and as of 2013, it was already N60.94 billion. It rose steadily to N80 billion in 2014.
At the end of September 2015, the unclaimed dividend stood at N90 billion. And by the end of the 2016 financial year the value increased to N100 billion in 2017, N120 billion in 2018 and N158.44 billion in 2019.
Speaking at the post-Capital Market Committee (CMC) press briefing recently, the Director-General of the SEC, LamidiYuguda, revealed that the figure hit N170 billion as at December 2020. The percentage increase from 2018 to 2019 was 32 per cent while the figure grew by 7.3 per cent between 2019 and 2020.
Market analysts have estimated that if the growing trend from 2016 to 2020 is not reversed, unclaimed dividend figure in the Nigerian capital market may hit N300 billion by the end of 2025.
Stemming the tide
Saddled with the primary responsibility of investor protection, SEC has repeatedly introduced initiatives to ensure that investors are not denied their right of investing in the capital market.
For instance, the market regulators introduced the process of dematerialisation, which is the conversion of a share certificate from physical to electronic form that is credited to an investor’s Central Securities Clearing System Limited (CSCS) account.
Unfortunately, the move, rather thanfacilitate transaction processes, has heightened the delay; accompanied by irregularities that also encouraged fraud, with attendant loss of share certificates, delay in receipt of dividend warrants, notices of meetings, and companies’ yearly reports, according to operators.
Consequently, many shareholders are not aware of the true status of their shareholding in many of the companies listed on the NGX, NASD Plc, or Over-the-counter (OTC), also called the off-exchange trading market.
Also, SEC in collaboration with the Central Bank of Nigeria (CBN), and the Nigeria Inter-Bank Settlement System (NIBSS) introduced the e-registration platform to eradicate difficulties encountered by retail investors in claiming dividends through their savings accounts. The system allows shareholders’ dividends to be paid directly into their designated bank accounts.
Besides, to eliminate the issue of disparity in names, the Commission introduced a forbearance window to enable investors who bought shares using multiple names, to regularise their accounts through their stockbrokers and registrars with valid evidence of purchase.
“We have told them that there is no penalty for doing so, as SEC is not prosecuting anybody. All we want is for them to be able to get the benefits of their investments”, SEC’s boss Yuguda, said:
“However, many people have still not been able to claim their dividends because some of them have forgotten the names they used while others have not been able to prove to their stockbrokers that they are the owners of the shares.
“The SEC has given such shareholders amnesty to go and claim their shares and as people are claiming those shares, unclaimed dividends number will go down. On our part, we will continue to persuade investors to regularise their accounts to curb the problem of unclaimed dividends.”
However, of all the measures the Commission has come up with, the idea of establishment of an Unclaimed Dividend Trust Fund – has never been received well in the market. In fact, the mere mention of the Trust Fund has always elicited rancour and controversy among the investors/shareholders.
Part XV of the Finance Act 2020, which had a commencement date of January 1, 2021, made provisions for the establishment of Unclaimed Dividends Funds. It provided that “Subject to Section 44 (1) (h) of the Constitution of the Federal Republic of Nigeria, 1999, there is established by the trust, as a sub-fund of the Crisis Intervention Fund, an unclaimed Funds Trust Fund.”
Part of the provision read, “Such unclaimed dividends and utilised amounts in a dormant bank account transferred to the Unclaimed Funds Trust Fund shall be a special debt owed by the federal government to the shareholders and dormant bank account holders respectively and shall be available for claim, together with the yield thereon, by the shareholder and the bank account holder at any time, pursuant to the aforementioned perpetual trust.”
In an interview with Business Hallmark,former Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, cautioned that rather than take over the funds, government should encourage the owners to come forward by way of sensitization and simplifying the process.
He said, “I don’t think it’s appropriate. You don’t look at funds that belong to people. I think what government needs to do is to ensure more sensitization to encourage people who have some of those funds to come forward.
“Because some of them are still around but because of the processes or the parents have died or something, they just forget it. You can simplify the process to encourage the owners of this money to come and collect their money or their children or their relations as the case may be.”
Similarly, human right lawyer, TunjiAbdulameed, said he does not support government borrowing unclaimed dividends without written consents of the owners.
“Ideally, before a thing like that is done, everything has to be spelt out – the time to pay back, the rate of interest and so on, but in this case there is nothing like that. No, it’s not tidy.”
Reacting to the rising dividend apathy, Professor of Economics, SheriffdeenTella, said because businesses are currently facing hard times and most Nigerians are holders of small units of shares, there is the likelihood that these smallholder investors get little returns.
He observed that the continuous rise in the inflation rate has impacted negatively the little income, making it worthless such that it costs more to obtain that income than to let it go with the bank’s charges.
“People need more enlightenment on shareholding. They can be educated that they can have an account with stockbrokers who can reinvest the dividends into the same or different company if they don’t want to collect it as a way of growing their investments.
“The issue of securitisation or enforcement of digitalisation of dividends can be left open and businesses be directed to reinvest the dividend for each shareholder. In the long term, shareholders can get interested in collecting their dividends, particularly if the economy grows.”
On his part, Executive Vice President, Highcap Securities Limited, David Adonri, noted that since inflation is the root cause of this situation, government should go the way of macroeconomic policies that will grow the economy and subdue inflation.
Adonri cautioned that if not well tackled, the situation is capable of reducing retail investors’ participation in the capital market as well as escalating the increase of unclaimed dividends.
He stressed the need for regulators and operators to intensify efforts towards ensuring full implementation of the e – Dividend policy of the SEC so that all dividends and interests are paid directly into investor’s accounts.
According to him, SEC needs to compel the registrars to utilise the ongoing investor accounts update by stockbroking firms and CSCS to capture investors’ bank account details for the purpose of e-Dividend payment, as execution of different e-Dividend mandates by investors for every registrar is not only tortuous and cumbersome, but also amounts to duplication of efforts.