420,000 investors of seven firms shun dividends over inflation, bureaucracy
• Shareholders blame ‘vested’ interest as unclaimed dividends’ figure hits N180b
• Insist SEC’s control measures not yielding meaningful result
Nigeria’s rising inflation may have begun to take a toll on the value of dividends, coupled with apathy from stringent bureaucratic processes, therefore compelling over 420,000 shareholders of seven quoted companies to abandon their dividends in the past few years.
Indeed, the value of the dividends has diminished and equally discouraged shareholders from claiming them despite weakening purchasing power that should have necessitated the need for an additional income.
The seven listed firms drawn across various sectors of the exchange’s daily official list as at 2021 and 2022 financial year are GTCO, Total Energy, Nigerian Aviation Handling Company (NAHCO), Guinness, UACN, Nigerian Breweries and Lafarge Africa.
Indeed, the incidence of unclaimed dividends has over the years remained one of the perennial issues that have continued to dominate Nigeria’s capital market. There have been concerns among regulatory authorities, company executives, registrars of companies, and the general public regarding the rising incidence of unclaimed dividends currently put at N180 billion.
This is in spite of measures put in place by the regulators to check the incidence in the local bourse. According to shareholders, the move, instead of boosting transaction processes, resulted in heightened delay, accompanied by irregularities that also encourage fraud.
For instance, dematerialisation, which is the conversion of a share certificate from physical to electronic form and credited to investor’s Central Securities Clearing System Limited (CSCS) account, has not helped much, due to the failure of registrars to fully adopt the electronic processing technology.
Moreso, many shareholders are not aware of the true status of their shareholding in many of the quoted companies due to mergers, acquisition and outright collapse of some of the firms.
In addition, because businesses are currently facing hard times and most Nigerians are holders of small units of shares, there is the likelihood that these smallholders got little returns.
The continuous rise in the inflation rate has negatively impacted the little income, making it worthless such that it costs more to obtain the income than to let it go with the bank’s charges.
But some of these firms have continued to declare mouth-watering dividends that have accumulated over the period, especially in the incidence of multiple subscriptions where investors subscribe to the same offer using multiple names.
A look at the unclaimed dividends list of companies quoted on the Nigerian Exchange Limited (NGX) showed that GTCO Plc’s list has 18, 5520 shareholders covering 619 pages in its unclaimed dividends list as at March 2022, while Total Energy list is made up of 8773 number of shareholders.
For Nigerian Aviation Handling Company Plc (NAHCO), its unclaimed dividend list has names of 10,131 shareholders as at June 2021 while Guinness has 45, 640 shareholders on its list. UAC of Nigeria has 65,555 shareholders as of March 31, 2022.
Nigerian Breweries and Lafarge constitute 92,936 and 17,921 shareholders as at December 31, 2021 respectively.
President of Ibadanzone Shareholders Association, Eric Akinduro accused the SEC of giving priority to the money instead of finding ways to ease the bureaucratic process of claiming the dividends.
“The figure will definitely be on increase because the SEC is not after alleviating shareholders’ suffering but in the money. Why do I say this? My recent experience as a shareholder showed that when the unclaimed dividend was with the registrars, it takes just a few days for it to be paid into shareholders’ accounts but as soon as the money is forwarded to the SEC, it takes infinity for the shareholder to claim it.
“Many of our members are presently at the mercy of the SEC to get their money. I have some members that are yet to get their cash consideration from these companies and all effort to get it has proved abortive despite several follow up.
“So shareholders will continue to suffer to get their money. The bureaucratic process of getting this dividend paid is a very impeding factor.
“Moreover, the staff are not trained. The best option is for the registrars to be paying while the SEC continues to monitor the processes through their database and become the custodian of the unclaimed dividends,” he said.
National Coordinator of New Dimension Shareholders Association, Patrick Ajudua said efforts by the SEC to stem rising unclaimed dividend figures have not yielded results as seen in financial reports submitted to the NGX so far.
He attributed the reason to lack of synergy among various coordinating agencies in the chain; the SEC, CSCS, unclaimed dividend trust fund agency and NGX, noting that these groups have failed to adopt a holistic approach in resolving the issue.
“For instance, the attitude of some registrars and companies in cooperating with the SEC in this regard is questionable.
“Also, the call for a review of legal bottlenecks that hinder beneficiaries of the deceased to initiate claims seamlessly is yet to be addressed. With all these issues unresolved, the figures continue to rise”, he added.
President of Independent Shareholder Association of Nigeria, Moses Igbrude stated that there are ‘vested interests’ in unclaimed dividends, noting it requires a high level of political will and commitment from all stakeholders in the value chain to tackle the problem.
“The Federal government that should have assisted in tackling the problem is now interested in the money through creation of Dividends Trust funds.”
Dividends are the distributable earnings of a company, which are determined by its board of directors. When a shareholder for any reason does not claim a dividend, it gives rise to the issue of unclaimed dividends.
The CAMA 1990 (revised 2020) refers to “unclaimed dividends” as dividends not claimed within six months after a declaration, and are returned to the company, from where the investors can make claims up till, but not later than 12 years.
The Federal Government, in line with the CAMA provisions had proclaimed that any dividend not claimed after 12 years becomes statute-barred and returned to the company to enhance profitability.
But last year, the Securities and Exchange Commission (SEC) disclosed that the N180b unclaimed dividends have finally been remitted to the Unclaimed Dividend Trust Fund (UDTF), which is being managed by the Commission and the Debt Management Office (DMO) despite efforts by shareholders to restrain the Federal Government from taking over the management of the fund.
Unclaimed dividend figures released by the SEC showed that the value has continued to increase and it appears no one is coming forward to claim it yet as the surplus keeps growing.