The Finance Act 2020 recently signed into law by President Muhammadu Buhari clearly provides that the federal government can borrow from the unclaimed dividends and dormant account balances under the Unclaimed Funds Trust Fund.
The funds are made available as a special debt owed by the federal government to the respective shareholders and the dormant bank account holders.
READ: COVID-19: Why banks would rather donate billions to FG than credit their customers’ account
According to the Finance Act,
- “Any unclaimed dividend of a public limited liability company quoted on the Nigerian Stock Exchange and any unutilised amounts in a dormant bank account maintained in or by a deposit money bank which has remained unclaimed or unutilised for a period of not less than six years from the date of declaring the dividend or domiciling the funds in a bank account shall be transferred immediately to the trust fund”
However, the official bank accounts owned by the federal government, state government, local governments or any of their ministries, departments or agencies are specially exempted by the Act.
READ: Active bank accounts in Nigeria surge to 111.5 million as COVID-19 drives account opening
What you should know
- The borrowed funds by the FG shall be available for claim with the appropriate yield by the shareholders and the bank account holders at any time.
- Failure by any company or deposit money banks (DMBs) to transfer such funds to the Unclaimed Funds Trust fund shall be considered as an offence and liable upon conviction to a fine of not less than five times the value of the funds plus accumulated interest on the amount not remitted to CBN, at the monetary policy rate.
- The trust fund shall be supervised by the Debt Management Office (DMO) but governed by a governing council chaired by the Minister for Finance, with the co-chairperson from the private sector that is appointed by the president.
- Such a person from the private sector shall be recommended by the Minister for Finance and duly confirmed by the Senate and must be of irreproachable integrity to serve in such capacity.
- Other members of the Governing council include the CBN Governor, DG of Securities Exchange Commission, MD of NDIC, a representative of the Registrars of Companies, 2 representatives of the Shareholders Association, a representative of the Bankers Committee and DG of Debt management Office as the Secretary of the Trust Fund.
READ: AfDB board approves $10.4 billion borrowing plan for 2021
What this means
- This means that the era of unclaimed dividends and dormant bank account balances is over.
- There is no doubt that this would, to an extent, affect the deposit portfolios of some DMBs as quite a number of them are sitting tight on humongous float dormant account balances, at no cost to them.
- Importantly, with these funds, it is expected that government would have more financial capacity to handle cost-intensive projects and infrastructural developments that would directly impact on the well beings of Nigerians if the funds are well utilized.
READ: Finance Minister, Heads, NNPC, DMO inspect Ajaokuta-Kano gas project