555,000 shareholders forfeit N215b dividends over costs, inflation

• UACN, NB, FBNH top list
• Shareholders seek active collaboration to stem challenge
• Registrars allegedly employing fraudulent schemes

No less than 554,858 investors have abandoned their dividends in nine blue-chip firms over value erosion, raising concerns about the efficiency of the electronic dividend programme and the commitment of company registrars to its implementation.

This comes almost a decade into the e-dividend payment regime, which was hailed as a game changer in dividend payment, was rolled out. The unclaimed  dividend figure stood at N80 billion when the e-Dividend Mandate Management System (e-DMMS) portal was unveiled in July 2015. The figure has grown by almost 170 per cent to an estimated N215 billion as of the first quarter of the year.

Investors have expressed concern about the rising unclaimed dividend figure, saying the regulator must address it to restore confidence in the market and enhance its integrity.

Top on the list of companies with huge unclaimed dividends is FBN Holdings Plc, Nigerian Breweries (NB) Plc, UAC of Nigeria Plc, Dangote Sugar Plc and Nestle Nigeria Plc. Others are Conoil Plc, Dangote Cement Plc, Lafarge Plc and FMN Plc.

Findings suggested that the continuous high inflation, which has impacted negatively the dividend value, high-cost transactions (including bank charges) and lacklustre interest from relatives of deceased shareholders are among the reasons for rising unclaimed dividends.

Shareholders would prefer to ignore the little incomes they are entitled to than go through the bureaucratic and expensive process of recovering them, findings have suggested.

But for the listed companies, the money has accumulated to huge sums, raising eyebrows from the government and the public. According to disclosures, there are cases where the original shareholders have passed on, leaving little or no information about their next of kin. Multiple applications by applicants during the investment process have also compounded the issue.

The Guardian was also informed of some deliberate roadblocks put in place by companies to deny investors their benefits through various schemes by some registrars and companies who lack sufficient liquidity to back up their dividend declaration.

Many companies, it was also learnt, have converted the pool of funds to working capital against the provision of the Companies and Allied Matters Act (CAMA), which stipulates that unclaimed dividends be invested in independent interest-yielding vehicles for shareholders.

The unclaimed dividend list of companies quoted on the Nigerian Exchange Limited (NGX) across sectors shows that FBN Holdings has 231, 750 shareholders on the list while NB has 87,145 as of December 31, 2023.

For UAC of Nigeria, its unclaimed dividend list is 65,528 shareholders while Dangote Sugar has 43,833. Nestle’s outstanding figure as of March 31, was 41,293 just as Conoil has 39,304 shareholders. Dangote Cement and Lafarge had 36, 275 and 7,240 respectively. FMN had 2,490 shareholders.

Shareholders at the weekend stressed the need for the Federal Government to return the N215 billion unclaimed dividend to companies that declared it done initially to revive ailing companies.

They urged the government to adopt a systematic approach that would help tackle underlying issues in FX management and infrastructure as a long-term solution to restoring listed firms’ profitability.

With the most listed companies, especially the fast-moving consumer goods (FMCGs) deep into losses with no timeline in sight to recover from the trend, the shareholders urged the government to revert to the initial method of ploughing unclaimed dividends back to companies that declared it after 12 years of non-claimant as a short-term measure to boost profitability.

The shareholders noted that the government for years has expressed the desire to borrow from the unclaimed dividends. According to them, the establishment of an unclaimed dividends trust fund by the FG has shown a lack of understanding of the mechanics of business and corporate management in Nigeria.

They believed that returning to the initial method alongside prioritising the ease of doing business in Nigeria would serve as a huge incentive and turn around the fortunes of these firms.

A member of the Exceptional Shareholders Association of Nigeria, Olugbosun Ariyo, said the rise in unclaimed dividends is driven by multiple factors.  He pointed out that many shareholders passed on without their beneficiaries being aware of their investments, coupled with the cumbersome legal process of claims in the capital market.

“Some registrars exhibit a nonchalant attitude, using unnecessary tactics to make the process difficult, even when shareholders provide all necessary documents, like name change confirmations or banker’s verification.”

Ariyo added that shareholder apathy is also a contributory factor as many investors weigh the cost of processing unclaimed dividends against the small amounts they stand to receive.

“The N200 service charge per company on the SEC’s e-dividend portal further discourages claims. SEC must ensure market integrity and resolve disputes swiftly, particularly for dividends in its custody, without creating the same hurdles registrars impose.”

Therefore, he called for all-inclusive synergy between all parties involved to find a lasting solution to the problem. President of the NewDimension Shareholders Association of Nigeria, Patrick Ajudua, said the unclaimed dividend figure has continued to rise due to the lingering legacy issue of identity management.

According to him, unless the stakeholders can genuinely address this issue of identity management and embark on a well-articulated awareness campaign, the issue of unclaimed dividends will continue to linger in the capital market. He also called for robust investors which would put into consideration shareholders in the rural areas without access to constant electricity and data services.

“The e-dividend portal is very commendable but still not free from network challenges. Therefore, we should consider those without access to data services in our desire to address this anomaly,” he said.

The problem started several years ago during the indigenisation exercises when several shareholders made multiple subscriptions in fictitious names whose signatures they could not remember.

The affected shareholders are also unable to open bank accounts in these fictitious names for the e-dividend collection. Also, during the capital market boom, in Nigeria, a lot of people ventured into investment in the capital market without adequate knowledge of how the market operates.

Many acquired shares in various companies on the advice of friends or family members who have no clue about how the market operates. This factor contributed to the increase in unclaimed dividends as some of these individuals hardly knew that they needed to lodge the warrant into their bank account while others did not even know what the warrant was.

The loss in value affected mostly salary earners, pensioners and depositors. The salary earners invested their salary then and because the market had witnessed a long period of downturn, coupled with rising inflation, the value of these investments has eroded, even any marginal appreciation may have been swallowed on banks’ charges and shareholders are piqued by the depreciating value of their dividends year in year out as the rate of inflation rises much faster than the rate at which dividend rises.

A look at how the problem of unclaimed dividends is tackled in other exchanges showed that the Johannesburg Stock Exchange (JSE) launched a nationwide initiative in February 2024 to match claimants with their unclaimed dividends.

JSE created a subsidiary called the JSE Investor Services (JIS) as an implementing agent for the processing and paying of dividends to legitimate claimants and updating share registers of companies.

The initiative is handled by one group as a subsidiary unlike in Nigeria where the execution of e-dividend mandates is handled by various registrars, which is considered as tortuous, cumbersome and duplicative.  Shareholders have kicked against the continuation of the method at different fora while advocating a centralised dividend payment system for the market.