‘Unclaimed dividend bill will erode investors’ confidence, hinder market growth
Capital market operators have warned that the proposed plan by the Federal Government to manage unclaimed dividends which is projected to hit N200 billion by the end of this year, would erode investor confidence and hinder the growth of the market.
As one of its last options to fund the economy, the government, based on the provisions of Section 39 of the 2020 Finance bill, proposed that unclaimed dividends of less than 12 years be managed on behalf shareholders through unclaimed dividend trust fund, while after 12 years, the money becomes forfeited to the government as perpetual debt to shareholders.
Addressing the Investigative Arm of House Committee on Capital Market and Institutions, the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Onyenwechukwu Ezeagu, noted that capital market regulators and operators had leveraged technology to put in place many initiatives to address the issue of unclaimed dividends.
He listed such initiatives to include the dematerialisation of shares, which entails upload of quoted companies’ shares in the Central Securities Clearing System (CSCS) for ease of reconciliation, adoption of e-dividend and e-mandate, consolidation of multiple accounts, identity management engagements, introduction of electronic Initial Public offering (e-IPO),
Others include: adoption of Minimum Operating Standards (MOS) for operators to enhance efficiency, intensified investor education, continuous stakeholders’ engagements, process reform and streamlining and KYC update on clients’ accounts among others.
“Generally, the incentive for savers and capital providers in the capital market is the expectation of dividends and capital appreciation. It is therefore our considered view that the proposed legislation, if passed, will be a great disincentive to savings, long-term capital mobilisation and serious disruption of the Nigerian economy since it will take away the only expectation of investors in the market, says Ezeagu.
Corroborating him, the President, Chartered Institute of Stockbrokers (CIS), Olatunde Amolegbe, who spoke on behalf of the Institute said the Securities and Exchange Commission (SEC), would always ensure that unclaimed dividends are transferred to capital reserves of the company for restricted utilisation such as capital expansion and issuance of bonus shares to its shareholders.
The Chief Executive Officer, Wyoming Capital, Tajudeen Olayinka, expressed dismay at the Act, adding that it would amount to deleveraging the banking system, whose stock-in-trade is cash, while at the same time, putting too much pressure on public companies’ additional source of finance. If passed by the National Assembly, He added that capital formation and investor confidence are at stake as well.’
Meanwhile, shareholders and financial experts have continued to kick against the controversial bill, saying the government has no business with unclaimed dividends.