By Chinenye Anuforo and Chinwendu Obienyi
an estimated N90 billion unclaimed dividend, currently hanging like an albatross on the capital market may soon be a thing of the past if investors continue to embrace the electronic dividend (e-dividend) introduced by the Securities and Exchange Commission (SEC).
Recall that the issue of unclaimed dividend had earlier thrown stakeholders into a dilemma. The confusion arose some stakeholders attempted to drown each other on how best to utilise the fund. While some said it should be ploughed back into the operations of the paying companies, others reasoned the huge sum should be channelled towards revitalising the capital market.
Others have also argued that the registrars of the paying companies should bend over backwards and locate their owners painstakingly with a view to making them take up their entitlements.
To solve the controversies, SEC, the apex regulator of the market, quickly introduced e-dividend to curb the wild growth of this corporate reward. Available information from the commission say, the volume of unclaimed dividend seems to be significantly coming down as the SEC Director General, Mounir Gwarzo, recently acknowledged that efforts by the commission to ensure that the era of stale dividends and huge unclaimed dividends in the market become a thing of the past were already achieving result.
Just last week, the commission stated that over N30 billion has so far been paid to investors in the market from the backlog of unclaimed dividends.
Gwarzo said, “when we started the e-dividend, the major challenge was for people to key into the e-dividend mandate. There are unclaimed dividends that have not been claimed; the registrars have been compelled to pay all the arrears of unclaimed dividends.
“In this country, we have never had this kind of initiative that has reduced unclaimed dividends like we have today. Apart from the investor getting his dividends wherever he is, that investor will be able to get dividends he has not been able to get in the last five years. The e-dividend is for the interest of retail investors,” he added.
As a means to further reduce the unclaimed dividends profile and curb its growth in the country, the commission notified the investing public that it will continue to underwrite the cost of e-dividend enrolment till June 30, 2017.
According to a statement by SEC, “with a view to ensuring that all investors benefit from the e-dividend programme free of charge, the SEC had committed to pay the cost of enrolment throughout 2016, and that had resulted in getting about 48 per cent of investors to enrol for e-dividend payments. Arising from this exercise, over N30 billion, which was hitherto unclaimed has so far been credited to respective bank accounts of investors.”
Therefore, the advantage of the e-dividend is not only to enable investors collect subsequent dividends electronically but it allows all accrued dividends to be credited to investors’ bank accounts.
“The commission has, however, observed with concern the challenges being experienced by investors in the course of the e-dividend registration and therefore commits to further defray the cost of registration till June 30, 2017, to enable investors continue to enjoy the free registration,” SEC stated.
It also reminded the investing public that at the expiration of the free registration period, dividend warrants will no longer be issued as it would be replaced with electronic dividend payments.
This decision underscores the commission’s strong focus on market development and enhancement of investor confidence. All investors in the Nigerian capital market are therefore advised to take advantage of this extended grace period by approaching their bankers or registrars for enrolment before the deadline.
The SEC’s claims were corroborated by Head, Vertical Markets Group, Nigeria Inter-Bank Settlement System (NIBSS), Samuel Oluyemi, who said precisely N29,277,739,604 has been paid out to investors, representing a decline of 32.6 per cent in unclaimed dividend as at October 2016.
He said, “approximately one year ago, the SEC launched the e-Dividend Mandate Management System (e-DMMS) in conjunction with the Central Bank of Nigeria (CBN) and all Deposit Money Banks (DMBs) as a means of reducing the level of unclaimed dividends in the capital market, ease the direct cash settlement initiative and generally boost capital market processes that will enable investors get their returns with ease. According to Oluyemi, the e-DMMS portal utilises NIBSS’ robust document management system to which the e-dividend mandate forms filled by the investor can be uploaded,” he explained.
Also reacting to SEC’s claims, President/Chairman of Governing Council of the Institute of Capital Market Registrars (ICMR), who is also the Managing Director and Chief Executive Officer of First Registrars and Investor Services Limited, Mr. Bayo Olugbemi, acknowledged that investors’ acceptance of the e-dividend has been encouraging and has helped to offset huge amount from the backlog of unclaimed dividend even though he believes there should be more public enlightenment on the initiative.
He confirmed that if investors embrace e-dividend fully, it will solve the issue of unclaimed dividend permanently as their dividends will be credited to them permanently.
The e-dividend form, which can be obtained and filled at bank branches or in the office of a registrar or stockbroking firms, helps the registrars trace, combine and seamlessly enrol shareholders’ investments/portfolio, leveraging the robust know-your-customer feature of the Bank Verification Number (BVN) system to ensure the payment of dividends directly into shareholders’ bank accounts.