Concerns have continued to grow following the Federal Government of Nigeria’s decision to securitize unclaimed dividends and dormant account balances of up to six (6) years in the country.
In the recently assented 2020 Finance Bill, the management of unclaimed dividends and dormant account balances has been captured as part of many other provisions intended by the Federal Government of Nigeria to mitigate Nigeria’s fiscal frailties and economic crunch caused by the emergence of Covid-19.
The funds realised will be placed in a trust fund, managed by the Debt Management Office (DMO). The DMO’s responsibility also includes payment of claims for such dividend and the accompanying compensation for accrued interest.
In 2015, the Securities and Exchange Commission (SEC) had issued a circular directing company registrars to remit to the paying companies; unclaimed dividends held up to 15months. Similarly, the Companies and Allied Matters Act (CAMA) 1990 (revised 2020) had provided that companies should publish the list of unclaimed dividends with names of all intended beneficiaries. After which, unclaimed dividends could be ploughed back for investment purposes.
As at the end of 2019, the total value of unclaimed dividends stood at 158.44bn. In 2015, the SEC had introduced the electronic dividend payment platform to enable an automated deposit of dividends to Investors’ bank accounts to help mitigate the incidence of unclaimed dividends.
While we agree with the public outcry that dividends and bank balances are private wealth of investors, either individuals or corporate entities and negates the provisions of the constitution when converted to federal wealth, we expect this policy move to benefit the fund owners as such funds (unclaimed dividends) is expected to earn interests payable to the beneficiaries instead of the previous arrangement where unclaimed dividends serve the holding firms.
However, we are concerned about the ability of the government to manage such funds effectively considering that a lot of resources will need to be deployed. That said, we expect that the announcement will trigger reactivation of dormant accounts of many banks and force many to try to retrieve their unclaimed dividends.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
