A cutting-edge solution to the problem of unclaimed dividends in Nigeria

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photo credit: freedigitalphotos.net

The problem

In an earlier blog post, I wrote about the alarming value of unclaimed dividends in the country which was put at an estimated N60 billion naira (about US$360 million). (Please see Much ado about unclaimed dividends) The Securities & Exchange Commission (SEC) has been in search for effective ways to reduce the value of unclaimed dividends in the country since the announcement of the estimated figure in March, 2013 through various consultations with stakeholders on how best to address the issue. One major challenge that was identified by the regulator is the fact that presently, banks only accept payment of dividend cheques into current accounts. For this reason, many shareholders who receive dividends and do not operate current accounts are deprived of their dividends. In a bid to proffer a solution to the issue, the SEC issued a directive to the effect that dividend payments in the country should be fully converted to electronic process in order for dividends to be paid directly in to the accounts of shareholders. The idea was to end the issuance of paper dividends by the stated deadline. However, due to response from stakeholders on the very short period allowed for the transition, the deadline for compliance with the directive  (which only allowed a period of forty days from April 24th – 3rd June, 2013) was postponed indefinitely to allow more time for modalities to be put in place as well as adequate enlightenment of investors.

The innovation

In a most commendable attempt to address this ugly trend of the increasing amount of unclaimed dividends, First Registrars Limited (formerly a wholly owned subsidiary of First Bank Nigeria Plc., now privately owned under a management buy-out arrangement) has blazed the trail with an innovative solution to the problem. The product is Firstdividend Plus prepaid card which is a premium card issued to shareholders into which dividend amounts due them are automatically loaded/credited on the payable date. The card can be activated and used via ATM or PoS terminals and could be credited with additional funds either by the card owner or a third party through at any First Bank or First Registrars offices nationwide. Although the card currently exists in only the verve format which limits its usage to local transactions only, the VISA and mastercard variants are expected to come on stream soon to enable owners use the card for international transactions. The product which could also be used for online transactions would benefit the hitherto disadvantaged retail investors who may not have bank accounts as the present system of paper dividend cheques require payment into a current accounts only. The move by First Registrars if well implemented is capable of drastically reducing the amount of unclaimed dividends in the country as the company has over thirty clients listed on the Nigerian stock exchange.

Conclusion

Registrars have been blamed for contributing to the problem of unclaimed dividends in the country due to poor record keeping and failure to update of shareholders’ records as share custodians. This innovation is indeed worthy of emulation and it is hoped that other registrars would follow the new path. It is important however to note that the innovation is not devoid of challenges. To start with, the card can only be obtained at First Registrars offices which are located in only 7 key commercial cities in the country – Lagos, Abuja, Port-Harcourt, Kano, Kaduna, Enugu and Ibadan. Thus, it will not be feasible for people in remote areas (who are actually the ones who stand to benefit more) to easily access this new product. It may be useful for First Registrars to liaise with a financial institution with strong branch network for the purpose of issuing the card. Again, there is need for robust customer enlightenment that goes beyond online adverts and notices about the new product. This is because internet literacy is still not well advanced in the country and there are many who may not get to know about the product if the information is restricted to online media only. Accordingly, radio, TV, and newspaper media should be considered by the innovators as a way of passing the much needed information across. Awareness is very crucial for the product to actually get patronage and indeed for the reduction of unclaimed dividends to be actualised in the long run.

Source: First Registrars Limited website

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4 thoughts on “A cutting-edge solution to the problem of unclaimed dividends in Nigeria

  1. The solution, which is welcome is in addition to the limitations you have already outlined above, further limited by the fact that First Registrars only have thirty (30) clients out of the over two hundred and fifty (250) securities listed on the stock exchange. Consequently, the effect of this innovation, if properly executed will be limited only to those clients of First Registrars. Nevertheless, it is a step in the right direction.

    • Thank you for your comment Biobele. Hopefully in no time, other registrars will follow the lead and more securities on the floor of the stock exchange would be covered.

  2. I must commend the efforts of first registrars. For the first time since 2006 I received my dividend warrants – this was as a result of not always picking them up from the post office after I relocated to another state.

    I have been to their office -and after providing necessary documents – I was credited with all unclaimed dividends for the last six years.

    It’s really a step in the right direction and actually gives some credibility. The issues with the card should be fine-tuned while they also encourage direct payments into individual accounts.

    Hoping they keep this up and others follow suit

    • Thanks for sharing your experience Tumini. Indeed it is quite encouraging to see that efforts are being made to correct a failing system of registry practice in the country.

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