August 23, 2022/CSL Research

Based on a Punch news report, the Director-General of the Securities and Exchange Commission (SEC), Mr Lamido Yuguda, at the second Capital Market Committee meeting recently held in Abuja indicated that the value of unclaimed dividends rose to N177bn in 2021 from N168bn in 2020. He stated that despite the electronic distribution of dividends done through bank accounts of investors against the usual dividend warrant, the duplicative efforts of investors to submit the same account details to each registrar they deal with had elongated the e-dividend payments process.

However, the commission is working to harmonize this process of supplying information to a point. Meanwhile, we recall in December 2021 that the Director-General had expressed dissatisfaction with the process associated with the release of unclaimed dividends to shareholders by capital market registrars and listed companies. According to the DG, some of the capital market operators have adopted several tricks to frustrate shareholders from enjoying the benefits of the e-Dividend Mandate Management System (E-DMMS) platform. He also spoke against the practice of making selective payments and distributing dividends to shareholders. 

The issue of unclaimed dividends in the Nigerian capital market has been on the radar for over a decade, with several efforts to reduce them to a minimal level. In 2015, the Securities and Exchange Commission (SEC) issued circular directing company registrars to remit to the paying companies; unclaimed dividends held for up to 15 months. Similarly, the Companies and Allied Matters Act (CAMA) 1990 (revised 2020) provided that companies should publish the list of unclaimed dividends with the names of all intended beneficiaries. In 2015, the SEC introduced the electronic dividend payment platform to enable an automated deposit of dividends to investors’ bank accounts to help mitigate the incidence of unclaimed dividends. However, unclaimed dividends have been on the rise. 

The Finance Act 2020 allowed the federal government to securitize unclaimed dividends and dormant account balances of up to six (6) years in the country. As expected, such a policy generated public outrage. In our view, the E-DMMS platform is key to resolving unclaimed dividends if investors are properly educated. While we laud the implementation of the E[1]DMMS platform, we expect improvements in the process of reconciling investors’ details, an adoption of a network of agents that could increase awareness in other states beyond Abuja, Port Harcourt, and Lagos and a possible implementation of digital pre-disbursement notification system to further enhance the achievement of the desired result.