To find lasting solution to the problem of unclaimed dividends in Nigeria, beneficiaries of deceased investors should be urged to step up efforts to claim such dividends. Chris Ugwu writes
Ever since the privatisation policy in the early 1970’s, unclaimed dividends have been a hydra headed monster in the history of the capital market.
Despite efforts by the regulators, the increase in the number of unclaimed dividends has raised concerns among the operators in the nation’s bourse.
The worrying situation became more prevalent because it is believed that the continued rise is detrimental to the growth and development of an emerging market that wants to achieve a world class market and attract direct foreign investment.
Reasons for high rate of unclaimed dividends
One of the major reasons responsible for the growth of unclaimed dividend concerns issues of shareholders who have died and without information on next of kin, multiple applications by applicants during the investment process and deliberate actions to deny investors their benefit through various schemes by some registrars and companies who lack liquidity to pay.
Other factors are loss of dividend warrants following poor postal system, change of mailing addresses without notifying the registrars and lack of awareness on the part of some investors.
The Managing Director, Crane Securities Limited, Mr. Mike Eze, speaking to New Telegraph, traced the genesis of the rising wave of unclaimed dividend to indigenisation era of the administration of General Yakubu Gowon.
“During this exercise, those in position of authority who had the wherewithal, acquired shares in the privatised companies with fictitious names of their drivers, cooks, gardeners, dead brothers, dead fathers etc in such a way that when the dividends came, they were not able to claim them. Why? Because there is no such persons to claim the dividend.
Speaking in the same vein, the Managing Director, Highcap Securities Limited, Mr. David Adonri, explained that unclaimed dividends are increasing every year due to several factors.
According to him, the problem started several years ago during the indigenisation exercises when several shareholders made multiple subscriptions in fictitious names whose signatures they cannot remember.
He noted that the affected shareholders are also unable to open bank accounts in these fictitious names for the purpose of e-dividend collection.
He added that most of the unclaimed dividends are statute barred and forfeited to the companies in which case recovery by the affected shareholders may not be possible in the absence of means of identification.
Need for deceased investors to claim dividends
In a bid to further reduce the quantum of unclaimed dividends in the Nigerian capital market, the Securities and Exchange Commission, (SEC) recently urged beneficiaries of deceased investors to step up efforts to claim such dividends.
This was stated by the Acting Director General of SEC, Ms Mary Uduk in her welcome remarks at the enlightenment programme for Lagos State Probate Registry.
Uduk, who was represented by Acting Executive Commissioner Operations of the SEC, Mr. Isyaku Tilde, said the purpose of the enlightenment programme is to give participants an understanding of the operations of the capital market, especially in the area concerning transmission of shares and administration of estate, areas in which the Probate Registry is a key stakeholder.
She stated that one category of investors whose investment yields have contributed to the growth of unclaimed dividends are deceased investors, whose beneficiaries as indicated in the will or letter of administration are yet to claim the investments and accrued dividends through the share transmission process.
According to her, “the capital market is a market for raising medium to long term capital via a number of instruments. The most popular of the instruments are shared and bonds with resultant yield of dividends and interests respectively.
“However, the quantum of unclaimed dividends in the Nigerian capital market has been on the increase, as investors fail to claim the dividends from their investment in shares.
Uduk also congratulated the Probate Registry on the recent commissioning of the e-filing probate registry, saying it will guarantee integrity of data, provide for online tracking of applications, simplify and shorten the application process of Letter of Administration and grants.
She therefore restated the readiness of the SEC to collaborate with the Probate Registry staff so that together the Nigerian capital market can become a desirable investment destination.
In a keynote address, Hon. Justice A.A. Oyebanji, who represented the Chief Judge of Lagos State, commended SEC on the enlightens programme, which she said will go a long way in aiding the staff of the probate registry on the discharge of their duties.
Oyebanji said the Registry processed legal instruments for the administration of the real and personal estate of a deceased person who was resident in Lagos State and who owned landed properties in the state.
She disclosed that the Probate Registry in Lagos State is now fully computerised and all applications must be made online.
“This e-Probate system was introduced primarily to ensure a more efficient delivery of services to elements of the public. It is aimed at reducing significantly the length of time required to obtain a Grant, whether in the Ikeja or the Lagos Division” she added.
Investors enjoined to key into e-dividend
Uduk said: “The essence of the E-Dividend Mandate Management System is to eradicate or reduce to the barest minimum the incidence of unclaimed dividend. Unclaimed dividend is an undesirable feature of the Nigerian capital market, which denies investors/shareholders the gains of participating in the capital market. It denies the economy access to the huge amount of money, which should have accrued to shareholders and would have gone into circulation to oil the wheel of the economy.
“It is a consequence of the bottlenecks, which are inherent in the erstwhile paper dividend warrant regime such as postal system inefficiency, change in investors’ addresses, poor fidelity and human fallibility in dividend payment processes, amongst others.”
She stated that the E–Dividend regime bypasses these limitations by ensuring that dividends, which do not exceed 12 years of issue are credited directly to an investors account after declaration by the paying company and within a stipulated payment period through simple interbank transfer.
The founder and former National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said for the objective of e-dividend to be achieved, “there is a lot of jobs to be done, that has been compounded by Know Your Customer (KYC) of banks. Many people in those days used shares as gifts to relatives and friends, which included rural dwellers and up till now many of them have no bank accounts. All these ought to be taken into consideration and addressed; it is definitely going to be a problem getting the rural dwellers to key into the system.
“It is estimated that we have about 10 million retail shareholders and only some few ones have complied. This means that they need to do a lot of work and that it will take many years to achieve 80 per cent compliance”.
According to the President, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, the aim might not be feasible unless given a legal backing.
“SEC needs to continue to lobby the National Assembly to expunge the issue of dividend warrants certificates in CAMA,” he said. “The arrangement is an understanding but it is not yet a law. SEC first of all needs to do the needful by increasing awareness for e-dividend and seek the amendment of in the law. “They can’t make it mandatory unless the law is amended. The only thing they need to do now is to keep on its enlightenment campaign to persuade investors to key into the system.”
While considerable efforts have been made by NSE, SEC and other stakeholders to educate shareholders and address some of their complaints on the need to embrace e-dividend, solution to the problem of unclaimed dividend in Nigeria will eventually be found if public apprehension of the capital market is substantially allayed with a better structured public awareness campaign to be jointly anchored by regulators and market operators for the education of shareholders and the protection of their interests, especially the small stock holders.
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