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Recently, the matter of the burgeoning unclaimed dividends in public companies resurged in the media, following a failed attempt by the Securities and Exchange Commission (SEC) to force the e-dividend option on all investors in the Nigerian capital market.   

This last move by SEC failed for many reasons, including the extremely short time frame within which shareholders were expected to adopt the new policy. A statement was issued by the Commission in April directing all shareholders to be e-dividend-compliant by 3rd June 2013, failing which an investor may forfeit future dividends, “except in the event that a shareholder specifically requests in writing for the continued issuance of dividend warrants. “

Anybody conversant with processes in the Nigerian capital market and the banking system would immediately conclude that the intended outcome of this directive was far-fetched. I was so convinced. And it was not surprising that stakeholder groups kicked against the diktat, pointing at the high unbanked population and lack of investor education among their reasons for opposing the directive.

But beyond the brusque approach of SEC to the issue and the combative posturing of some stakeholder groups, there is so much about the vexed issue of unclaimed dividends that cry for a concerted and urgent action by all concerned. N60 billion is a lot of money to leave “just like that”, more so as the problem has demonstrated a tendency to grow with time.

The history of unclaimed dividend in Nigeria tells us that it is the outcome of a complex of factors, including inefficiency of the postal system, failure by affected shareholders to communicate their new addresses to the registrars (in the event of change of address), inability of cheats involved in multiple new issue applications to remember the various names (and addresses) by which they subscribed for shares (especially during the indigenization and privatization programmes), and the refusal of banks to accept the payment of dividend warrants into savings accounts. Of course, as with dormant bank accounts, the balance of unclaimed dividends also feeds on estates of shareholders that have since passed on and for which there are no claimants.

In diagnosing the problem of unclaimed dividends, a lot has been made of the so-called lackadaisical attitude of shareholders and the inefficient postal system. But the truth is that by omission or commission, our public companies have immensely contributed to the rapidly increasing unclaimed dividends balance. At a seminar I facilitated on Investor Relations, an Investor Relations Officer (IRO) unabashedly said that companies have use for unclaimed dividends and see no incentive for them to ensure that shareholders cashed their dividend warrants. The question is, if public companies do not encourage shareholders to cash their dividend warrants, is it not likely that the desperate ones among them will work to ensure that dividend warrants do not get to shareholders at all?

Following the last Annual General Meeting (AGM) of Access Bank Plc, it was reported in the media that the bank was able to reduce the quantum of unclaimed dividends in its books by 78% in one year, down from N3.148 billion to N687.6 million. Unfortunately, the media did not go beyond merely reporting the drop to convey the more important news of how this was achieved. But imagine 78% being shaved off the reported N60 billion worth of unclaimed dividends in the capital market in one year!

Given the reported success of Access Bank in dealing with the bogey of unclaimed dividends, it is all too obvious that our public companies have not been positively creative in tackling the problem. In the United Kingdom, shareholders can choose how to receive their dividends. Options include joining the issuer’s Dividend Reinvestment Plan (DRIP). If, as it is alleged, our public companies would rather keep dividends than have shareholders get the money, why don’t they formalize (and legalise) the process of holding back the money? Shareholders of Barclays Plc have just approved the introduction of a Scrip Dividend Programme to replace DRIP. But more importantly, Barclays Plc shareholders can access their dividend information online via “Barclays e-view”. In Nigeria, for most public companies, shareholders have to wait to receive a sometimes bulky and forbidding booklet of list of unclaimed dividends to know if they missed a payment.

I believe that in this matter, Mazi Okechukwu Unegbu, stockbroker and past President of Chartered Institute of Bankers of Nigeria, hit the nail on the head when he told a newspaper that poor communication strategy evident in the shoddy manner notices of AGM were communicated to shareholders has contributed a lot to the build-up of unclaimed dividends. Our public companies are just not talking to their shareholders. How can they, when they do not even know their shareholders?        



The author, Mr. Okafor, works for Alexander-Davids Limited, a boutique Investor Relations advisory firm, in Lagos