April 23, 2024

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Shareholders Lament High Unclaimed Dividend Rate

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CEM REPORT, MARKET | Shareholders have blamed poor technology adoption and data management in the country for the rising figure of unclaimed dividend.

They noted that except the parties involved in the processing of the claims to adopt robust technology infrastructure that would enable investors to process their unclaimed dividend in the comfort of their homes, the menace may not be eliminated in the capital market.

The Director General of the SEC, Lamido Yuguda, at the virtual post-Capital Market Committee (CMC) press briefing disclosed that unclaimed dividend has reached ₦190 billion in 2022 an 8,369 per cent increase from ₦2.09bn in 1999.

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Shareholders opine that beneficiaries in most cases due to the cost of processing the claims leave their dividends with the registrars.

President of the New Dimension Association of Nigeria, Patrick Ajudua said the shareholders’ particular focus should be in the areas of simplifying letters of administration for the deceased family and making the process of claims less cumbersome and rigorous.

“We are not surprised that the figure has not been reduced. The reason is the lack of political will and sincerity by major players in the industry in confronting the issue, especially in probate issues and the cumbersome process of claim. Matters are made worse when investors realise that the cost of procuring a letter of administration, publication, registrar charges and bank charges are higher than the value of the dividend to be claimed.

“There is a need to simplify the process of claim and deploy more technology to ease claims. This will ensure that investors do not need to come to the registrar for unclaimed dividend claims but can sit in the comfort of their homes/offices and process their applications with little or no cost. NIBSS should also upgrade its portal to ease e-dividend mandate claims and ensure quick verification and prompt claim processing. Most times the portal experiences more downtime that discourages investors.”

In addition, Ajudua suggested enhancing SEC’s collaboration with key stakeholders in the value chain; the registrar, CSCS, NIBSS, CAC and banks to improve processes and enhance efficiency.

“SEC should also work closely with shareholders association leaders so that these leaders would help in reaching out to their members who have unclaimed dividends. Also, more advocacy is needed via social media, print and electronic media on unclaimed dividends.”

National Coordinator of the Independent Shareholders Association, Moses Igbrude, said: “If for so many years that we have been talking about unclaimed dividends, and with all the various initiatives, money and resources put in place to tackle the problem, the figure keeps increasing, there is a fundamental problem that needs urgent attention in the process.

“There is an urgent need to reassess and investigate the unclaimed dividends value chain to identify what the issues are. SEC should work closely with stakeholders involved in the processing and deploy the right technology to tackle the problem. Why should newly listed entities like MTN, Airtel or SAHCO have an unclaimed dividends list,” he queried.

President of the Ibadan zone Shareholders Association, Eric Akinduro blamed the rising figure on SEC’s failure to ensure that parties responsible for the processing of the unclaimed dividends adhere strictly to regulatory rules and requirements.

“Honestly, we are not getting it right in this country and because we have failed to get it right, the figure will continue to rise. SEC as the apex regulatory authority should ensure that all parties responsible for the processing of the unclaimed dividend adhere strictly to regulatory rules and requirements.

“We believe it can be reviewed and made less cumbersome in this era of IT, and BVN, among others. Some people are discouraged by this complex process, which results in more unclaimed dividends. Regulators should call a stakeholders meeting and review the present modality for better and more modern ways of resolving it such as the use of the next of kin, BVN, and biometric details among others.

“Also, the bureaucratic nature created by the registrars in claiming dividends is always discouraging. Many investors’ signatures are not regular again because the stocks were bought a long time ago but BVN validation should suffice. Registrars should be meant to live up to their responsibilities.

Akinduro noted that the adoption of technology to monitor parties in the chain would provide better data on the number of dividend request claims.

“The regulator should adopt a robust technology infrastructure that would link all the parties in the value chain to monitor the activities of each party. This would help them to know how many requests of dividend claims are processed from time to time.

“Honestly, on the part of the CSCS, they are trying to synchronise the investors’ portal. As of today, no CSCS account can be opened when such an act is not linked to BVN. This is expected to help in this regard.

“Likewise, banks should educate their contract staff as some of them are not enlightened when it comes to the submission and processing of e-dividend mandates to the NIBSS portal. Shareholders also should regularise their account with BVN to enable registrars to process,” he said.

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Shareholders recommended that the regulators collaborate with other market stakeholders on how to make the process less stringent to find a lasting solution to the rising rate of unclaimed dividends.

Dematerialisation, which is the conversion of a share certificate from physical to electronic form and credited to the investor’s Central Securities Clearing System Limited (CSCS) account, has not helped much, as the failure of registrars to fully adopt electronic processing technology is another disincentive to market investors. Instead of improving transaction processes, the change has increased latency, which is accompanied by inconsistencies that facilitate fraud.

For the 2022 audited full-year result, a total of nine listed companies posted N20.9 billion outstanding unclaimed amounts compared to N20.08 billion in the 2021 financial year.

The nine companies are Nestle Nigeria Plc, Nigerian Breweries Plc, Seplat Energy Plc, Dangote Cement Plc, MTN Nigeria Communications Plc, Lafarge Africa Plc, BUA Cement plc, Dangote Sugar Refinery Plc and Nascon Allied Industries Plc.

The 2022 audited result showed that Nestle Nigeria recorded ₦7.58billion unclaimed dividend higher than ₦6.6 billion in 2021, while Nigerian Breweries reported ₦4.8 billion unclaimed dividends in 2022 as against ₦4.6billion in 2021.

Dangote Cement announced ₦4.4 billion in unclaimed dividends within the period from ₦4.6 billion in 2021 while Lafarge Africa’s unclaimed dividend figure stood at ₦1.64 billion unclaimed dividends compared to ₦1.4 billion in 2021.

Also, NASCON Allied Industries recorded an increase in its unclaimed dividend to ₦695.8 million up from ₦658.16 million in 2021.

BUA Cement’s unclaimed dividend rose from ₦474.7 million in 2021 to ₦689.54 million while MTN Nigeria Communication posted an N632 million unclaimed dividend in 2022 from ₦688 million.

Seplat Energy reported ₦448.55 million in unclaimed dividends in 2022 from ₦939.25 million in 2021, while Dangote Sugar’s figure rose to ₦39.27 million from ₦88.34 million in 2021.

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