Although payment of dividends to shareholders of quoted companies in Nigeria has been fraught with several administrative bottlenecks leading to rising incidences of unclaimed dividends over the years, the challenge is still far from being resolved even with the introduction of e-dividend option.
Already this perennial problem has continued to generate a lot of debate that has attracted the concerns of all stakeholders in the nation’s capital market, given that dividends are a major attraction to investors.
The reason being that the amount of dividend declared by a company often influences investors’ perception of the company and the importance of the actual cash received by investors assumed a great deal of significance.
But delays in the receipt of dividend made equity financing unnecessarily difficult and expensive to others particularly when the investment is funded by a bank loan upon which interests accrue on an ongoing basis.
The e-dividend is an electronic dividend payment, that enables an investor’s account to be credited after 24 hours that dividend is declared it was described as a game changer in the market by the now suspended Director General of the commission, Mounir Gwarzo, who said
it will ensure market infractions are reduced to the barest minimum.
The Commission, thereafter, in 2015 said it will bank roll the cost of the exercise to encourage more patronage from investors and consistently shifted the free registration exercise time after time. But despite all these gestures, the result in terms
of mass participation has remained below expectation.
Head, Vertical Markets Group, Nigeria Inter-Bank Settlement System (NIBSS), Samuel Oluyemi, had however said that about N29,277,739,604 has been paid out to investors, since the project was tagged off, representing a decline of 32.6 per cent in unclaimed dividend as at October 2016.
Gwarzo commended the registrars for this achievement and added that SEC achieved the milestone through the nationwide advocacy of all the stakeholders in the market.
“E-dividend is in the interest of retail investors. Our focus is to bring back the confidence of retail investors to the market,” the erstwhile DG said.
But when the apex regulator in 2018 decided to stop the free registration exercise, there were several calls from different quarters questioning its decision.
The commission also said, “investors should continue to approach their banks or reg- istrars, as usual, to seamlessly mandate their bank accounts for the collection of their dividends electronically, in- cluding unclaimed dividends, not exceeding 12 years of is- sue; as the N150 would not be demanded from them at the point of registration.”
Specifically, Gbadebo Olatokunbo, a shareholder activist and co-founder, Nigeria Shareholders Solidarity Association (NSSA), had argued that all the Commission had been do- ing was making money for the banks.
Hear him: “There is no sense in what SEC is saying because it has been making money for the banks all along; they were not bankrolling anything. The purpose of commercial banks is to collect money to channel into proper use and one cannot channel what he/she doesn’t have. So, what is SEC bankrolling? What are their arrangements? Secondly, if SEC is after reducing unclaimed dividend and not deceiving it- self or the public, I don’t think there should be a limitation to the time of what it is doing to ensure that all shareholders are enlisted.”
Olatokunbo said, “it is the registrars department that is not doing what it ought to be doing. Why introduce the platform of shareholders pay- ing money? What is the cost in the first instance? It is high time SEC was probed because this idea that people will be paying money for e-dividend is fraudulent since companies are paying registrars for services rendered. So, why should shareholders pay money again?” he asked.
He pointed out that part of the problem the market is facing is regulators making policies without proper consultations, adding that he idea of deducting N150 from share- holders for e-dividend registration was not acceptable.
The Commission ignored these calls and went ahead with the exercise and as at November 2018, the Acting Executive Commissioner, Corporate Services at SEC, Henry Row- land, noted that the e-dividend process remained functional and active and had increased to 2.5 million from 2.1 million people who had mandated ear- lier, showing progress.
Meanwhile, the exercise began to be inundated by complaints with some investors saying that registrars were deliberately frustrating the adoption.
Rowland, in response, said that as long as investors are finding it difficult to key into the programme, the scheme could not be said to be satisfactory. He said that the Commis- sion had mandated registrars to provide periodic feedback on the list of mandated accounts and challenges they are having.
Speaking to newsmen during the 1st quarter Capital Market Committee (CMC) meeting which held in Lagos recently, Rowlands revealed that the Commission discovered that since it halted the free registration exercise, the level of mandates from investors had stopped as well.
According to him, the Commission took critical cognizance of the slow pace of the exercise and was planning on re-intensifying efforts to get the public interested.
He said, “we discovered that while e-dividend is growing and it is reducing unclaimed dividend, the pace is not as satisfactory as when we observed that multiple accounts which has not been claimed for many years are still having dividends accrued. So we decided that the multiple accounts regularisation needs to be handled grossly and with speed because there are some people that had multiple accounts and can only make claim on one account for dividend.
SEC cannot continue to pay for the registration of mandates but there is a strategy that we will review alongside the banks and registrars to entice investors. The total amount of money deductable from every approved mandate is N150 and investors are not going to be asked to pay the N150 at the point of registration. This token fee is to maintain the process- ing portal and investors should go to the nearest banks and submit their forms.”
Reacting to these developments, shareholders in separate telephone interviews with Daily Sun, urged SEC to do everything possible to ensure the initiative is successful.
The National Coordinator, Progressive Shareholders’ Association of Nigeria (PSAN), Boniface Okezie, while express- ing concerns at the situation, noted that some registrars who are frustrating the exercise are doing that because they have not been paid by the Commission.
His words: “Basically, for me, the question should be how much has SEC paid registrars when they bankrolled the e- dividend mandate? There are feelers from these registrars that some of these monies SEC ought to pay them has not been paid. This is because these registrars were charging investors N150 before SEC came in to bank roll the e-dividend mandate. For me, SEC should have continued paying until there
is 80-90 per cent of investors keying into the e-dividend mandate, then the remaining might pay a subsidised amount so that all investors will be in the net. They should not have stopped paying despite enlightement going on.”
Okezie thereafter added that to get the desired positive result, the commission should distribute free banners display- ing the e-dividend mandate to registars who in turn should display the banners at companies’ Annual General Meetings (AGMs) venues.
For his part Grand Patron, Noble Shareholders Association (NSA), Timothy Adesiyan, urged the commission to do the needful and ensure the level of unclaimed dividends gets reduced to the barest minimum, adding that investors with legitimate claim backed with evidence can come up and claim these dividends.
“The fact is that many people did not come forward because of the cost at that time before SEC came in and paid and people mandated their accounts. Now that SEC has stopped, investors are not responding well and what we are begging SEC, alongside what we are responding to, is to liase with the probate registry so that people who are dead, their children or relations can always come up to make claims to the deceased shares. Such people might not mind the cost being charged, so the Commission can liase with the government to make the probate registry operate with shareholders at the point of demise of any shareholder,” he said.
However, National President, Constance Shareholders’ Association of Nigeria (CSAN), Shehu Mikail, said, “SEC should not stop bankrolling the e-dividend mandate until harmonisation of multiple accounts stops as regards its deadline because this will inject fresh confidence altogether to more shareholders and investors who are yet to key in.
“There are roles that registrars, stockbrokers and CSCS houses have to play to reduce the issues of the unclaimed dividend. Also, part of the reasons dividends remain unclaimed points to the probate issue with courts. I am happy that SEC announced that it has made progress in attempting to resolve the issues around transmission of shares related to the estate of deceased investors.”