3rd March, 2015
Over the years the value of unclaimed dividends in the Nigerian stock market has continued to increase. From a very negligible sum in the early 1970s, the value is currently estimated at over N70 billion.
Official data from SEC, shows unclaimed dividends had increased sharply from about N27.8 billion in 2008 to N41.3 billion in 2009. The figure increased to N41.7 billion in 2010. In 2011 it hit N50.2 billion but slightly increased further to N50.7 billion in September 2012. By the end of 2012, SEC put unclaimed dividend at N60 billion. The sum is currently estimated at more than N70 billion, based on its three-year growth average.
According to the provision of the Companies and Allied Matters Act (CAMA), unclaimed dividends are dividends not claimed within six months after declaration of earning by a company and are returned to the company, from where the investors can make claims not later than 12 years. This implies that a shareholder would forfeit dividends not claimed within 12 years.
Many reasons have been attributed for the mounting incidence of unclaimed dividends. These include issues of shareholders who died without giving due information on their next-of-kin to claim such dividends and multiple applications made by applicants during investment process such as during initial public offers (IPOs). Others are loss of dividend warrants by investors as a result of Nigeria’s poor postal system, change of mailing addresses without notifying the registrars as well as lack of awareness on the part of the investing public.
Also identified were lack of operating current accounts for cashing dividends, while some shareholders consider certain amount of money too small to warrant the headache.
Some registrars and companies who lack liquidity are also known to deliberately deny investors their benefits through various schemes. Due to these factors, billions of naira lie unclaimed and unused in the market.
While we acknowledge the efforts of the Nigeria Security and Exchange Commission and other relevant agencies in tackling this challenge, we believe that more can be done to encourage shareholders to claim their dividends.
There is the need for the Central Bank of Nigeria (CBN) to mandate the banks to accept payment of dividend warrants into shareholders’ savings accounts.
SEC should compel the stock broking firms, which are the first point of contact with investors, to make it mandatory for them to fill the e-dividend form at the time payment is being made for the transactions. The practice has been that clients who were not informed of this development initially, later have to grapple with the hassle of getting the e-dividend form, after being told that dividend had been declared.
On their part, the stock broking firms should make it mandatory at the point of first contact that investor’s current account is a pre-condition for the conclusion of their transactions. This is because most clients only get this piece of information whenever they come back to dispose of their shares.
Also, as a way to further facilitate payment of dividend warrants, banks should not insist on client’s current account, as most of them are small investors who are ill-equipped to open current account.
Furthermore, in order to curb the excesses of some companies that declare dividends without making efforts or having no money to pay, relevant sections of the CAMA might need to be amended to compel such companies to transfer such unpaid dividends to a special account to be opened by the companies on their behalf in any scheduled bank to be called ‘Unpaid Dividend Account’.