Genesis Essien

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.

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.

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.”