300,000 shareholders abandon dividends over inflation, red tape
• Unclaimed dividends now N170b, could hit N300 billion if not reversed by 2025
• FBN Holdings, Nestle, Nigerian Breweries top firms with unclaimed dividends
• Operators say development undermines SEC’s effort, market growth
• Economists urge FG to tackle causal factors, focus on growth-induced policies
In what appears like apathy arising from inflation and bureaucratic processes, over 300,000 shareholders of 10 blue-chip firms, despite a need for additional income, have failed to claim their dividends in the last five years, findings have shown.
This is just as the Securities and Exchange Commission (SEC) recently declared that unclaimed dividends were rising and are currently in excess of N170 billion.
Top on the list is FBN Holdings, Nigerian Breweries, UAC, Nestle Plc, Dangote Cement, Total Plc, Unilever, Okomuoil and Cutix.
Dividends are the distributable earnings of a company, which are determined by its board of directors. When the shareholder for any reason does not claim a dividend, it is termed unclaimed dividends.
The Companies and Allied Matters Act (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 had proclaimed that any dividend not claimed after 12 years becomes statute-barred and will be forfeited.
Despite commendable yields from these firms, compared to many others, their shareholders appeared to have abandoned the dividends, owing to what stakeholders described as the effect of inflation on the dividends’ value, tedious processes in accessing the dividends and multiple subscriptions by investors.
The Guardian investigations revealed that the preponderance of unclaimed dividends was due to multiple subscriptions by investors. Multiple subscriptions happen when investors subscribe to the same public offer with multiple names.
The Guardian learnt that many investors are no more interested in regularising their shareholding accounts for the purpose of conversion to the e-Dividend mode of payment.
A cursory look at the unclaimed dividend list of companies quoted on the Nigerian Exchange Limited (NGX) across sectors since the global financial crisis of 2009 showed that Total Plc’s list has 9,750 shareholders covering 50 pages in its unclaimed dividend list, while FBN Holdings list is made up of 255,486 number of shareholders.
For Nestle Plc, its unclaimed dividend list has names of 17,206 shareholders, while Nigerian Breweries has 100,000 shareholders on its list. Dangote Cement’s unclaimed dividends outstanding as of December 31, 2020, were N4.0 billion compared with N3.5 billion as of December 31, 2019.
Unilever has 7,050 shareholders covering 282 pages while Okomuoil and Cutix constitute 4,873 and 7457 shareholders covering 237 and 208 pages respectively.
UAC’s unclaimed dividend list stood at 3,331. For Julius Berger and Dangote Sugar Refinery, 2,173 and 10,279 numbers of shareholders made up their unclaimed dividend list. Guinness and GlaxoSmithKline list is made up of 45,324 and 2,835 shareholders.
With the Federal Government’s posture on forfeiture for failure to claim, operators expressed fear that the growth of the capital market would be threatened, if a major incentive for investment like dividend payout is no longer attractive to retail investors.
They argued that since inflation is the root cause of the situation, macro-economic policies of the government that will grow the economy and subdue inflation would be helpful.
Professor of Economics at Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, said because businesses are currently facing hard times and most Nigerians are holders of small units of shares, there is the likelihood that these smallholder investors get little returns.
He pointed out that the continuous rise in the inflation rate has impacted negatively the little income, making it worthless such that it costs more to obtain that income than to let it go with the bank’s charges.
“People need more enlightenment on shareholding. They can be educated that they can have an account with stockbrokers who can reinvest the dividends into the same or different company if they don’t want to collect it as a way of growing their investments.
“The issue of securitisation or enforcement of digitalisation of dividends can be left open and businesses be directed to reinvest the dividend for each shareholder. In the long term, shareholders can get interested in collecting their dividends, particularly if the economy grows.”
Recent figures released by the National Bureau of Statistics (NBS) showed that Nigeria’s inflation rate in the month of August 2021 dropped to 17.01 per cent from 17.38 per cent recorded in July 2021. However, economists dismissed the figures, saying they are far from the reality of everyday Nigerians.
Professor of Economics at Babcock University, Ogun State, Segun Ajibola, said one of the common devastating effects of inflation is the erosion of the value of the domestic currency.
He pointed out that the loss in value affects mostly salary earners, pensioners, depositors and fixed income investors on an agreed rate of returns and dividend income.
Ajibola added that shareholders are often irked by the depreciating value of their dividends, year in year out, as the rate of inflation rises much faster than the rate at which the dividend rises.
He said the government needs to encourage local production, improve the quality and quantity of infrastructure, as well as provide incentives such as tax rebates and concessionary loans to SMEs to bring down the cost of production and rising inflation.
Indeed, there has been a lot of worry among regulatory authorities, company executives, registrars of companies, and the general public, regarding the rising incidence of unclaimed dividends.
This is because, despite the measures put in place by SEC to stem the rising figure, investors’ returns on investment have continued to accumulate on a yearly basis without being claimed.
Specifically, the value of unclaimed dividends as released by SEC was N2.09 billion in 1999, this rose from N5.1 billion to N6 billion between 2002 and 2004. In 2005, the unclaimed dividend increased to N6.4 billion. At the end of 2008, it stood at N17.9 billion. Within a period of nine years, between 1999 and 2008, the figure rose by 756.46 per cent, resulting in a yearly average of 84.05 per cent.
The SEC quarterly report puts the value of unclaimed dividends as at December 2010 at N37 billion. The top five companies that made up the figure within the period included: Union Bank plc, First Bank, Access Bank Plc, GTBank Plc and Intercontinental Bank Plc with N12,200,330,118.80, N4,955,377,734.18 N3,779,661,895.12 , N3,371,590,767.98 and N2,947,724,640.01 respectively.
The figure increased to N52.2 billion in 2011 and this grew one year later to N60 billion as at December 2012 and as of 2013, it was already N60.94 billion.
It rose steadily to N80 billion in 2014. At the end of September 2015, the unclaimed dividend stood at N90 billion.
By the end of the 2016 financial year, the value increased to N100 billion in 2017 and N120 billion in 2018. As of 2019, it stood at N158.44 billion. At the post-Capital Market Committee (CMC) press briefing recently, the Director-General of the SEC, Lamidi Yuguda, disclosed that the figure hit N170 billion as at December in 2020.
The percentage increase from 2018 to 2019 was 32 per cent while the figure grew by 7.3 per cent between 2019 and 2020.
With this growing trend from 2016 to 2020, market analysts have estimated that by the end of 2025, the unclaimed dividend figure in the Nigerian capital market may hit N300 billion if the trend is not reversed.
Checks by The Guardian revealed that unclaimed dividends with companies (15 months and above) stood at N119.01 billion while the ones with registrars amounted to N14.64 billion and unclaimed dividends less than 15 months old stood at N24.77 billion.
SEC, saddled with the primary responsibility of investor protection, has repeatedly introduced initiatives to ensure that investors are not denied their right of investing in the capital market.
For instance, the market regulators introduced the process of dematerialisation, which is the conversion of a share certificate from physical to electronic form that is credited to an investor’s Central Securities Clearing System Limited (CSCS) account.
The move, rather than boosting transaction processes, has instead heightened the delay; accompanied by irregularities that also encouraged fraud, with attendant loss of share certificates, delay in receipt of dividend warrants, notices of meetings, and companies’ yearly reports.
As a result, many shareholders are not aware of the true status of their shareholding in many of the companies listed on the NGX, NASD Plc, or Over-the-counter (OTC), also called the off-exchange trading market.
The e-registration platform was also launched as effort by market regulators to eradicate difficulties encountered by retail investors in claiming dividends through their savings accounts.
SEC undertook the initiative in collaboration with the Central Bank of Nigeria (CBN), and the Nigeria Inter-Bank Settlement System (NIBSS). The Commission also introduced a forbearance window to enable investors that bought shares with different names to regularise their accounts.
Director-General of SEC, Lamido Yuguda, said: “We have told them that there is no penalty for doing so, as SEC is not prosecuting anybody. All we want is for them to be able to get the benefits of their investments.
“However, many people have still not been able to claim their dividends because some of them have forgotten the names they used while others have not been able to prove to their stockbrokers that they are the owners of the shares.”
“The SEC has given such shareholders amnesty to go and claim their shares and as people are claiming those shares, unclaimed dividends number will go down. On our part, we will continue to persuade investors to regularise their accounts to curb the problem of unclaimed dividends.”
Vice President, Highcap Securities Limited, Imafidon Adonri, said since inflation is the root cause of this situation, macroeconomic policies of the government that will grow the economy and subdue inflation will be helpful. He warned that the situation is capable of reducing retail investors’ participation in the capital market as well as escalating the increase of unclaimed dividends.
Additionally, he stressed the need for regulators and operators to intensify efforts towards ensuring full implementation of the e – Dividend policy of the SEC so that all dividends and interests are paid directly into investor’s accounts.
He said SEC needs to compel the registrars to utilise the ongoing investor accounts update by stockbroking firms and CSCS to capture investors’ bank account details for the purpose of e-Dividend payment.
He pointed out that the execution of different e-Dividend mandates by investors for every registrar is tortuous, cumbersome and duplication of efforts.
Therefore, he called for the discontinuation of the method, while advocating a centralised dividend payment system for the market.
He advised that all registrars should forward all due investor’s dividends and interests to CSCS who shall, in turn, pay directly into the bank account of investors under the arrangement.