Poor information, deceased shareholders drive N215bn unclaimed dividend disaster

Unclaimed dividends, a persistent problem in Nigeria’s capital market, have sparked frustration amongst shareholders. The problem stays unresolved regardless of the introduction of digital techniques and reforms by the Securities and Trade Fee. TEMITOPE AINA addresses questions on systemic inefficiencies, lapses by registrars, and the affect of useless shareholders.

Introduction

The Nigerian capital market, which has lengthy been thought of a crucial engine for financial progress, is now grappling with a major disaster that has left buyers in frustration and uncertainty. The unclaimed dividend disaster, which at present stands at a staggering N215bn, has raised questions concerning the effectiveness of the techniques in place to handle shareholder dividends and the bigger implications for buyers, particularly by way of belief and confidence out there.

A dividend is a portion of an organization’s earnings distributed to its shareholders, sometimes within the type of money or further inventory.

In August, The PidomNigeria reported that the Securities and Trade Fee had reiterated its dedication to resolving the lingering problem of unclaimed dividends by means of the deployment of superior expertise options and improved stakeholder engagement. The Director-Common of the Securities and Trade Fee, Emomotimi Agama, acknowledged the problem posed by the mounting unclaimed dividends and vowed to cut back this backlog.

Regardless of the continuing push for modernisation and enhancements within the sector, such because the introduction of the digital dividend (e-dividend) system by the Securities and Trade Fee and different reforms, many buyers nonetheless discover themselves unable to say their dividends. The explanations for this lingering problem are manifold, from registrars’ inefficiencies to shareholders’ incapacity to maintain observe of their investments, in addition to the challenges posed by deceased buyers’ estates.

The disaster has reached alarming proportions, with the determine for unclaimed dividends rising steadily every year. Within the face of those setbacks, shareholders lament the systemic flaws, and questions are being raised concerning the position of registrars, the federal government, and market regulators in addressing this prevalent problem. The monetary and psychological toll on buyers is immense, and the shortage of a transparent and environment friendly mechanism for dividend cost solely exacerbates the sense of alienation within the capital market.

Historic information of unclaimed dividends

The problem of unclaimed dividends in Nigeria’s capital market has grown considerably over time, highlighting deep-rooted inefficiencies throughout the system. In 1999, unclaimed dividends stood at N2.09bn, however by 2015, the determine had skyrocketed to N90bn. The development continued as unclaimed dividends reached N158.44bn in 2019, N168bn in 2020, and N177bn in 2021. Most just lately, by 2023, the quantity surged to N190bn and at present stands at N215bn, underscoring persistent challenges comparable to outdated processes, lapses in record-keeping, and systemic obstacles to claims. This alarming improve displays the pressing want for reforms to handle the structural causes of the rising drawback.

Background to the disaster

The unclaimed dividend disaster has been a problem for a few years and has solely gained important traction within the final decade as an increasing number of shareholders have come ahead with complaints. The introduction of the e-dividend system, which was meant to streamline the method of dividend cost and distribution, has helped considerably by lowering the effort and time required for claimants to entry their funds. Nonetheless, it has not fully solved the issue, and in some instances, it has added extra layers of complexity.

A big portion of the problem lies within the position of registrars, the entities answerable for sustaining correct shareholder information and processing dividend funds. Registrars have usually been criticised for poor record-keeping, inefficient responses to enquiries, and an absence of accountability in managing shareholder information. This has contributed to a state of affairs the place dividends are both not paid out on time or stay unclaimed resulting from systemic failures.

Along with registrars’ lapses, one other contributing issue is the growing variety of shareholders who’ve handed away with out their households or heirs being conscious of their investments. This has compounded the issue, leaving substantial quantities of dividends unclaimed for lengthy durations.

Influence of late shareholders and household challenges

The Nationwide Coordinator of the Pragmatic Shareholders Affiliation of Nigeria, Bisi Bakare, shared her perspective on the problem, highlighting how the e-dividend system has improved accessibility however nonetheless leaves important gaps.

“Frankly, thus far, I don’t have any points in claiming my dividends. Thereby, none of my dividends are standing unclaimed at the moment,” she mentioned, praising the developments within the digital dividend (e-dividend) system.

Nonetheless, Bakare pointed to a crucial drawback: the struggles confronted by households of deceased shareholders. “The foremost causes for giant quantities of unclaimed dividends out there are late shareholders whose households are discovering it very troublesome to get what registrars are demanding from them to say the dividend,” she defined.

She additionally highlighted one other important problem: the unawareness of some households about their late kinfolk’ investments. “There are numerous shareholders who’re late, and their households aren’t conscious they’ve shares in these firms. No person will declare the dividends until eternity,” she added.

Bakare additional underscored the problems arising from the irregularities in the course of the privatisation period. “We’ve shareholders that purchased shares with completely different names for causes greatest recognized to them. Up until at the moment, they will’t keep in mind the names or addresses they used,” she famous.

Registrars below fireplace for inefficiencies

The inefficiencies of registrars in managing shareholders’ information have drawn criticism from buyers. The President of the Noble Shareholders’ Solidarity Affiliation, Mathew Akinlade, recounted his ordeal, calling for better accountability.

“I’ve challenges in claiming my dividends with solely two registrars the place I’ve a couple of account for a similar firm. In some way, the quantities have been insignificant. Therefore, I’ve not pursued them. It hasn’t affected my funding methods in any method,” Akinlade defined.

Akinlade corroborated Bakare’s assertion concerning the late buyers being the main contributors to the big unclaimed dividend, noting that, “I consider the big sum in unclaimed dividends will likely be resulting from deceased buyers who had died with out leaving a will, and their relations and kids aren’t conscious of their investments.”

Nonetheless, he criticised the registrars for his or her lapses. “I’ve seen circumstances the place registrars opened a couple of account for me, even when my identify, tackle, telephone quantity, and electronic mail tackle have been the identical. Such accounts must be robotically consolidated,” he mentioned.

He additional argued that registrars’ inefficiencies contribute considerably to the unclaimed dividend disaster. “Registrars’ lapses in sustaining correct information and coordinating accounts have left many dividends unclaimed. They need to take accountability,” he confused.

Akinlade additionally expressed disapproval of the federal government’s makes an attempt to say unclaimed dividends after the statutory interval, stating, “What’s equitable is to return the unclaimed dividends to the paying firm after the years allowed statutorily reasonably than the federal government asking for the cash. The federal government had taken their share of the revenue by way of firm revenue tax and withholding tax on dividends. They don’t have any enterprise asking for the unclaimed dividends to be returned to them.”

Grassroots buyers face larger hurdles

For minority shareholders, the method is commonly more difficult. Ariyo Olugbosun, a shareholder, recounted his experiences with registrars, highlighting the shortage of coordination and accountability.

“My e-mandate can’t be processed as a result of the registrars declare my signature report is lacking from their archives,” he mentioned. “These experiences have negatively impacted my belief out there, highlighting an absence of coordination amongst key gamers. The SEC should maintain registrars accountable, as the majority of those issues stem from their lackadaisical perspective.”

Olugbosun additionally criticised the dealing with of estates for deceased shareholders. “The difficulties surrounding record-keeping, hurdles, and prices associated to managing the property of a deceased shareholder are a major barrier. Registrars should collaborate and cross-check their databases, as a shareholder experiencing challenges with one registrar might have clean transactions with one other,” he defined.

Requires legislative reform, public consciousness

The Nationwide Coordinator of the Progressive Shareholders Affiliation of Nigeria, Boniface Okezie, emphasised the necessity for legislative reform to handle the disaster. He argued that the statute of limitations on unclaimed dividends, as outlined within the Firms and Allied Issues Act, have to be reviewed.

“The regulation says after 12 years, if no shareholder comes ahead to say dividends, it should revert to the businesses that declared them. Why are they jettisoning that provision of the Firms and Allied Issues Act? SEC should name for an modification of that part of the regulation,” Okezie acknowledged.

He additionally referred to as for extra public consciousness campaigns, significantly for grassroots buyers. “The SEC should embark on enlightenment programmes with different stakeholders. The rapid previous administration of SEC below the management of Gwazo launched e-dividends, however that has not solved the problem totally. The message has not gotten to the grassroots and even city dwellers,” he mentioned.

Wanting forward

Because the unclaimed dividend disaster deepens, stakeholders are calling for pressing reforms. Improved record-keeping, stricter oversight of registrars, and grassroots consciousness campaigns are seen as important steps to handle the N215bn dividend disaster.

Whereas the SEC continues to implement technological options and have interaction with stakeholders, it’s clear that the decision of this disaster would require a coordinated, multi-pronged method. Till then, shareholders, each residing and useless, will stay victims of a system in want of restore.

E-dividend portal to mitigate disaster

The Securities and Trade Fee has intensified efforts to handle the unclaimed dividend problem by means of technological developments. In response to The PidomNigeria, the SEC has urged buyers to leverage the revamped e-dividend portal to mandate their accounts, highlighting the platform’s enhanced safety and user-friendly interface.

In a bid to deal with legacy id administration points, the SEC inaugurated an in-house committee in January 2019 to look at and resolve these persistent challenges. The committee’s report underscored the crucial want for consolidating buyers’ information and discovering a sustainable answer to identity-related hurdles within the capital market.

Constructing on these suggestions, the SEC dissolved the in-house committee in 2021 and established a market-wide committee to conduct a extra complete investigation into Nigeria’s id administration disaster. This broader method goals to ship lasting reforms and foster better effectivity in managing shareholder information, in the end lowering the quantity of unclaimed dividends.