CEM REPORT, MARKET | Unclaimed Dividend has hit a whopping ₦190 billion despite measures put in place to check the incidence in the local bourse.
The total value of unclaimed dividends rise by 7.35 per cent from N177bn recorded in 2021.
The Director General of the SEC, Lamido Yuguda, disclosed the current figure at the virtual post-Capital Market Committee (CMC) press briefing held at the weekend.
Yuguda identified challenges with identity management in the country as a major contributor to the rising number of unclaimed dividends.
He also stated that various subscriptions and identity management methods contributed to the increase.
“The issue of unclaimed dividends, why is it happening? Unclaimed dividends have become a very serious problem in our country because we have issues with identity management within the capital market. We have issues with multiple subscriptions.
“People were using different names to subscribe to share offerings. We had situations where not information was captured about individual subscribers. Then, a lot companies changed their names.
“We have had legacy issues that have aggravated the problem of unclaimed dividends.”
He said the commission is working strategically to resolve the issues with the introduction of an electronic dividend (e-dividend) portal.
He claimed that the Nigeria Inter-Bank Settlement System (NIBSS), the Institute of Capital Market Registrars (ICMR), and the Committee on Capital Market E-Dividend Mandate are collectively working on enhancing the functionality and user-friendliness of the e-dividend portal.
Yuguda proposed that by adopting this, the SEC will be able to dramatically improve the experience of investors when uploading the necessary information and tackle the problem of unclaimed dividends in the stock market.
He lauded the Nigerian Exchange Limited’s (NGX) proposal to permit corporations to list bonds denominated in dollars as a positive move.
According to Yuguda, the commission is undergoing reforms to reposition the Nigerian capital market as a preferred location for foreign investments.
The SEC’s Executive Commissioner, Operations, Dayo Obisan, stated that while the figure for the unclaimed dividend had gone up, there was a need to pay attention to the pace of increase.
However he noted that efforts were being made to reduce the figure.
“It is estimated to be N190bn, but I think one of the most important questions to keep asking is the trajectory of growth. Is it growing at a reduced pace? One of the major issues that keeps the figure of unclaimed dividends high is having the final beneficiaries of this money have access to them.”
“At our meeting yesterday (Thursday), we discussed that efforts are being made by the regulators and other capital market operators to ensure that the spate and volume of unclaimed dividends is reduced by transmitting them to the beneficial owners.
“We keep putting a lot of efforts and activities towards making sure that investors on their own come forward to claim their dividends, update their information and other Know Your Customers details, which will not only help us reduce the volume of unclaimed dividend but ensure that future benefits, which is not only limited to unclaimed dividends, get quickly transmitted.
“Thirdly, that everyone in the capital market is rightly and adequately accounted for, so that our data is more robust to aid our planning.”
The figure has experienced a steady rise in the last 24 years at the Nigeria capital market rising by over 94 per cent.
In 1999, it was about N2 billion, rising steadily to N8 billion in 2008, N41 billion in 2011, N60 billion in 2013, and N80 billion at the end of 2014.
When the e-dividend mandate was introduced by SEC at the end of September 2015, the value of unclaimed dividends stood at N90 billion. As of 2019, it stood at N158.44 billion but rose to N168 billion in 2020.
Last year, the SEC declared that the total value of unclaimed dividends in the country rose to N177bn in 2021.
Meanwhile, the SEC Director-General, revealed that registered exchanges in Nigeria outperformed global indices in the first half of the year.
“The registered exchanges present at the meeting informed members that Nigeria outperformed global indices on gains in the All-Share Index and market capitalisation.
“This exceptional performance can be attributed to several factors such as appealing dividend yields offered by certain stocks, the recovery of corporate earnings and a notable improvement in sentiments among domestic retail investors. Also, all indicators reflecting investor involvement including volume, value and the number of transactions have demonstrated month-on-month increase throughout the first half of 2023.”
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Also, the SEC DG allayed fears about the proposal of the Nigerian Exchange Limited to allow the listing of dollar-denominated bonds by some selected companies and later equities.
“For dollar-denominated bonds listed on the NGX, I don’t see any problem. Any bond should be an obligation. It is backed by the ability of the obligor to repay the bonds. So, while that bond has that attribute, then it doesn’t matter the currency or the denomination.
“Of course, that bond could be a corporate bond, a sovereign bond or an agency bond. What matters really is person or entity that has borrowed the money through that bond is able to meet the requirement of both interest and principal as they fall due. Once, it is there, it is a good investment for those who wish to participate in those kinds of funds.”