The Nigerian Stock Exchange (NSE) is planning to send a proposal to the Central Bank of Nigeria (CBN), which will facilitate the payment of dividends into savings accounts by investors.
Currently, banks refuse to accept dividend warrants into savings accounts because of the Know Your Customer (KYC) issues. This development has not only discouraged many investors from patronising the capital market but has also led to high level of unclaimed dividends in the market.
However, THISDAY checks revealed that the NSE was finalising a proposal that would be sent to the CBN so that apex bank would authorise banks to accept dividends into savings accounts.
Apart from some hybrid accounts which combine both features of savings and current accounts that accommodate the payments of dividends warrants, banks only accept dividend warrants into current accounts. This has been a disincentive in market.
“As part of efforts to reform the market and encourage more patronage and reduce unclaimed dividends, NSE is sending a proposal to the CBN on the need to ease its regulation in respect of dividend warrants payment into accounts,” a source close to NSE said. Before now the Securities and Exchange Commission (SEC) has introduced electronic (e) dividend to solve the problem but the e-dividend has not worked as expected.
While some investors, mostly those in the remote areas, hardly have access to registrars to fill the e-dividend mandates, there have been complaints that some registrars fail to execute the e-dividend mandate given to them by other investors.
SEC disclosed recently that the unclaimed dividends in the capital market stood at N52.2 billion as at December 31, 2011.
And apparently worried by the rising level of unclaimed dividends, the House of Representatives last April passed a resolution mandating the House Committee on Capital Markets and Institutions “…to investigate the high volume of unclaimed dividends in quoted companies in Nigeria.
SEC had hailed the resolution saying that legislative attention to the intractable issue of unclaimed dividends was a positive development.
“It was out of concern for this unfortunate situation in which return on shareholders’ investment by way of dividends is perennially locked in the unclaimed dividends saga that as far back as in 2002, the SEC sponsored a bill in the National Assembly for an act of parliament which will set up the “Unclaimed Dividend Trust Fund”.
This fund and the Act of Parliament which set it up were intended to drastically reduce or completely eliminate the incidence of unclaimed dividend by providing alternative domicile for funds deriving from unclaimed dividends to what was stipulated in Section 382(1) of the Companies and Allied Matters Act,” SEC said.