Five years after, e-dividend still a pipe dream

E-dividend refers to the payment of dividend into a shareholder’s nominated bank through a direct credit rather than issuing a cheque or warrant. But efforts to mandate the policy in Nigeria by the regulator have not yielded result since 2008. JOHNSON OKANLAWON writes:

When the Securities and Exchange Commission, SEC, led by Ms Arunma Oteh postponed the deadline of June 3, 2013 for transitioning to edividend payment in the country, it was yielding to pressure from some shareholders who insisted that the commission does not have the power to prevent investors from getting their dividends.

SEC had in April, this year directed investors and shareholders of public companies to forward their bank account details to their registrars and stockbrokers to facilitate the electronic payment of future dividends on or before June 3, 2013. But shareholders have disagreed with the directive, saying that SEC has no right to put them in a tight corner, as many structures have to be in place before SEC’s decision to cancel dividend warrants.

A shareholder, Mr. Adebayo Adeleke, said the decision by SEC may not reduce unclaimed dividends, as most of shareholders don’t have current accounts to give registrars. He added that SEC would have settled with the Central Bank of Nigeria, CBN, to accept savings account to be used instead of putting them in a tight corner.

He said, “SEC does not have powers to prevent investors/ shareholders from getting their dividend. There is a section in the Investments and Securities Act that protects investors or shareholders to claim their dividend for a period of 12 years and any alteration to this must be done by the National Assembly and not SEC.”

The National Coordinator of Independent Shareholders Association of Nigeria, ISAN, Mr. Sunny Nwosu, said the move by the SEC might cause more panic in the market. “We do not believe that the action of the SEC in this regard is in the right direction because it seems the commission is not taking the plight of investors into consideration before coming up with such a decision,” he said.

To the President of Nigeria Solidarity Shareholder Association, NSSA, Mr. Timothy Adesiyan, the e-dividend campaign should be welcomed by all shareholders, saying that he has been receiving dividends from companies through the electronic payment.

On the notion that banks don’t accept savings account for dividend payment, he said, “Though I don’t have savings account, but many of the banks now accept the account and none of my members has ever complained of the electronic payment system. Some shareholders do condemn the policy generally without being affected.”

On February 28, 2008 when the commission led by the then Director General, Mallam Musa Al Faki launched the electronic payment system (e-dividend) in the country, it was applauded and supported by various stakeholders such as the Nigerian Stock Exchange, the CBN, Nigerian Inter- Bank Settlement System, capital market operators and shareholders’ associations amongst others.

As at then, the value of unclaimed dividends stood at N19 billion. First Registrars had about N4 billion unclaimed dividends, Oceanic Registrars N2 billion, Sterling Registrars N2.5 billion and Union Registrars N2 billion. The figures of unclaimed dividends soared to N52 billion in 2011 and N60 billion in 2012, according to Oteh.

This means that the amount of dividends declared by quoted companies, but remained unclaimed by the end of 2012 grew 215.8 per cent in six year from N19 billion in 2008 to N60 billion. The enabling laws, says that dividend, once declared, becomes statute bared (reverts to the firm that offered it, where it remains unclaimed for 12 years). In 2003, the unclaimed dividend rose to N6.4 billion. It dropped in 2004, but by 2008 it was N19.9 billion, before galloping 70.4 per cent by the end of 2010 to N33.9 billion.

National Mirror investigation revealed that the reason for the accumulation of unclaimed dividends is ignorance or when shareholders change their forwarding addresses without informing the companies’ registrars thus, failing to receive the dividend warrants. Others include shareholders who died intestate and without information on next of kin, multiple applications by applicants during the investment process and deliberate actions to deny investors their benefit through various schemes by some registrars and companies that lack liquidity to pay.

National Mirror learnt that the low value of dividend currently being paid to shareholders is further increasing the amount of unclaimed dividend in the vaults of the companies. Several retail shareholders are ignoring the dividend companies have declared because the value is negligible. Some are N50, N100 and N500.

And that is why many shareholders don’t care or find time to change to e-dividend where the amount will be automatically credited directly into their accounts within 24 hours of payment by concerned companies. A shareholder, Mr. Jude Ugochukwu, for example, was paid a dividend of N83.00 as dividend for 1,000 units of Nestle Nigeria Plc for the financial year ended December 31, 2011.

But he was unable to claim the money due to its meagre value. “How do you expect me to go to the bank to present a cheque of N83.70 when the transport fare to the bank is even higher than the value of the money,” she claimed.

Another shareholder, Mrs. Gbemi Olujobi, was not in the country when the dividend warrant from National Aviation Handling Company Plc was posted to his house. By the time he arrived, he could not claim the money because the warrant must be presented to the bank within six months.

“If I had opened an e-dividend account, the money would have been transferred into my account,”s he noted. Commenting on the development, Chairman, Association of Stockbroking Houses Owners of Nigeria, ASHON, Mr. Emeka Madubuike, said the issue of unclaimed dividend has been a long-term problem and the position taken by the SEC is to solve the problem and not to complicate it.

In his view, the Chief Executive Officer of Lambeth Trust and Investment Company Limited, Mr. David Adonri, stated that the transition to e-dividend is long overdue, adding that the position of the SEC is not to deny investors/shareholders their dividend but to ensure that they comply with the development to reduce unclaimed dividends. He therefore advised investors to comply expeditiously so that all problems associated with payment of dividends can be eliminated.

On the need for each shareholder to open an account with a bank, Mr. Adegboyega Gabriel who has 2,000 units of Zenith Bank shares said that the major problem is the time to waste for filing of e-dividend forms. To him, with introduction of e-dividend, the regulator is trying to assist investors to get their payment as at when due, but he has not time to go to the registrar office to fill the form due to the fact that the value is negligible. Some are N50, N100 and N500.

Another shareholder, Mr. Semiu Akindele said, “We are still lagging behind in Nigeria in this modern day of information technology. The effective way, is that, the registrars should send e-dividend forms to all the shareholders to fill in their saving or current accounts and send it back to them by post or by e-mail.

“There is no need of getting endorsement from any bank. It is another avenue for the bank to charge money to sign a form. I did it last two year at First Bank and I was charged N600 for confirmation. Our system is outdated when you compared with what is happening in modern world.

We still have a long way to go.” To a student investor at Ahmadu Bello University, Zaria, Mr. Rasaq Iyanda, it will be very appreciated if a specimen of the form can be posted on net. When National Mirror checked the website of some quoted companies, it was stated that investors can fill in the e-dividend payment form on line.

For instance, Oando Nigeria Plc said, “A shareholder who has a bank account (Savings or Current Account) with any bank, can gives his/her accurate account details to the company (by completing the mandate form) and his/her dividend paid directly into that account.”

Also, Meristem Registrars Limited said, “E-dividend payment is one stop solution to unclaimed dividend. Shareholders should take advantage of it.” A Chartered Accountant and Stockbroker, Mr. Matthew Ogagavworia agreed to e-dividend policy but argued that the initial timing is unacceptable! “How can you give one month’s notice for shareholders to supply their bank details with registrars or stockbrokers,” he asked.

According to him, the postponement of the deadline is good because some shareholders could be out of the country. He therefore advocated for a six to 12-month time frame. To ease the problem, Ogagavworia pointed out that the SEC should set up a databank such that when an investor completes the account form with his stockbroking firm or a company registrar, such information is available to all others, to enable them pay the dividend.

The President of Chartered Institute of Stockbrokers, Alhaji Olushekun Ariyo, noted that the postponement will allow SEC and other stakeholders in the capital market to educate investors to open bank accounts. But he urged the commission to put a control mechanism in place to ensure that companies pay dividends as at when due.

He said, “What if the investors open the account and the company or the registrar don’t pay the money into the account on payment date? E-Dividend is good but it does not guarantee payment.” The SEC’s Board Chairman, Mr. Suleyman Ndanusa disclosed that companies get incentives on unclaimed dividend.

“If a company declares maybe last year N2 billion and this year they are declaring N5 billion, people will applaud them for that and want to buy their stocks. But now I think both the regulators and the market are doing better in trying to see some of those tricks,” he said.

According to him, many companies usually do a profiling of the shareholders, as after they declare N5 billion as dividend, if they see that the noise makers and the sophisticated shareholders of the company are to take about N2.5 billion, they will go and borrow that amount to pay them. He added that while those that are in Diaspora and villages that are not readily available to demand their money, the company will device all kind of reasons not to pay them.

He said the reason why companies are doing this is that the law requires them to declare dividends, and if they do not have cash they have to borrow, adding that it’s better for them to borrow N2.5 billion instead of N5 billion because of the interest factor. “Therefore, that is why we proposed that once you declare dividend whether you pay or not, that cash must leave your system.

Let it stand there as a critical test of whether or not you have the liquidity to justify such huge dividend, why didn’t you declare N1 billion dividend, why N5 billion. You are getting the benefit of N5 billion dividend in the market, but you are only paying N1 billion, “he said. Ndanusa stressed that in the United States, some of the states have unclaimed dividend because people die or relocate but they found a way of ensuring that these monies were not just kept by the companies.

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