Financial experts and operators in the Nigerian capital market have advised the federal government to establish holistic legislation on unclaimed financial assets across the economy with a view to managing them for the benefit of all instead of isolating unclaimed dividends in the capital market through the Finance Bill 2021.
The federal government has proposed to set up an Unclaimed Dividends Trust Fund with the intention of taking over the over N150 billion unclaimed dividends in the capital market, a move many stakeholders have kicked against.
The analysts said at the Capital Market Correspondents Association of Nigeria (CAMCAN) 2020 Annual Workshop with the theme: “COVID-19: Impact and Opportunities for the Nigerian Capital Market,” at the weekend in Lagos, that unclaimed dividends is one of the smallest portion of unclaimed financial assets in the country, which include dormant accounts, unclaimed bankers’ cheques, unclaimed insurance benefits among others, which run into trillions of naira.
They, therefore, said the government should go after those financial assets.
The President of the Institute of Capital Market Registrars and Chief Executive of Coronation Registrars Limited, Mr. Seyi Owoturo, stated that research carried out four years ago showed that there is more than N1 trillion unclaimed in the country and asked government to approach the National Assembly with a bill that would be passed as unclaimed assets law in Nigeria.
Owoturo said: “We did a study about four years ago that estimated the value of unclaimed financial assets to be more than N1 trillion.
The problem that I see is that the government shouldn’t be using the Finance Bill to take over unclaimed assets. It should go to the National Assembly and do an unclaimed assets law. Let us face unclaimed assets generally. There are unclaimed (banker’s) cheques that are issued by companies. In Britain, these cheques will go to the Crown while in the United States of America (USA) they will go to the state of the intended beneficiary’s last known address. There are also unclaimed insurance benefits and dormant bank accounts that were estimated at over a trillion naira four years ago. The unclaimed dividend is only about N150 billion. Really if there is a problem, it certainly is not unclaimed dividends. The real problem here is that they abound all over the place.”
He added that the enactment of a holistic unclaimed assets law would also resolve the potential conflict that would arise from the Finance Bill, which stipulated that the unclaimed assets would revert to the government after 12 years while the amended Company and Allied Matter Act 2020 stated that the unclaimed dividend, should revert to the company.
“Where will the money go? All over the world, countries seek to institute discipline and transparency around unclaimed assets by letting them go to either the sovereign or the state governments. But what the bill is saying is that after 12 years, it would not revert to the company as stated by CAMA but to the government,” he said.
He also called on the government to partially privatise its stakes in the Nigeria National Petroleum Corporation (NNPC) and the refineries through the stock exchange in order to improve their efficiency and deepen the capital market.
“So many assets are tied up with the government. What will happen if NNPC is partially privatised? A case in point is the Liquefied Natural Gas (LNG), which pays over a billion dollars every year as a dividend. Contrast that with the NNPC that made a loss of N40 billion. You can imagine the difference and how that will stimulate significant economic activities if entities like NNPC and the refineries are partially privatised,” he stated.
Also, a financial economist and Professor of Capital Market, Nasarawa State University, Prof. Uche Uwaleke, in his keynote address, titled: “The Capital Market in Post COVID-19 Nigeria Economy,” supported the idea that the government should take over the unclaimed assets.
He advocated Nigeria emulating countries like Uganda, Kenya, The United Kingdom and USA that have specific legislation that governs the treatment of unclaimed assets in their respective jurisdictions.
Uwaleke, however, advised against the involvement of the Accountant-General of the Federation and the Ministry of Finance in the management of the trust fund that would shepherd the unclaimed dividends when they became statute-barred.
He said: “What I do not support there is bringing in the Ministry of Finance and the accountant-general to the management of the trust fund. I think that the trust fund should be managed by the stakeholders themselves so that registrars should be part of its management. What about the unclaimed dormant accounts that also run into billions?”
He warned against the anticipated moral hazard that might ensue if companies are allowed to take over the unclaimed dividends.
“There is this issue of moral hazard in some countries where these funds return to the companies in the sense that if unclaimed dividends should return to the companies after a period of time, there will be no incentives for those companies to be chasing the real owners to come for those dividends.
“So, my recommendation is that it should not be limited to dividends alone; it should also cover dormant bank accounts. I think that the idea that government should take over unclaimed assets is in line with what obtains in other jurisdictions,” Uwaleke said.
He urged the government to pursue the diversification of the country’s export base to reduce the vulnerabilities of the country’s foreign reserves to external shocks.
He recommended that the government should partially privatise the NNPC via the stock exchange rather than its commercialisation as contained in the current Petroleum Industry Bill (PIB) that is pending before the National Assembly.
Uwaleke said: “The new PIB is talking about commercialisation while the former Petroleum Industry Governance Bill talked about privatisation through the stock exchange, which in my view is the way to go.
“Section 66 of that bill says that within the first five years of the incorporation of the National Oil Company of Nigeria (NOCN), it should be listed on the stock exchange to privatise 10 per cent of its assets. That is the advocacy that I want all of us to join hands in. Because when you commercialise, it will still be 100 per cent owned by the government and the problem will still be there.
“I use every opportunity to tell the government that the solution is not commercialisation but privatisation. Can anyone show me any oil company that is wholly owned by the government that is doing well? International oil companies that are doing well are all partly privatised.”
He argued that the solution for Nigeria is to partially privatise the NNPC and the refineries because the nation cannot continue to run them as public corporations, adding that the proceeds of the privatisation could be used to recapitalise the Bank of Industry and the Bank of Agriculture.
“The low capitalisation of these development finance institutions is foisting on the central bank the work of development finance against its core monetary responsibility,” he said.
In his opening remarks, the Director-General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, said the commission is making “more deliberate efforts towards attracting retail investors back into the market by allowing investors with multiple accounts in the market to harmonise and consolidate their numerous accounts into a single one and claim their accrued dividends. This is in a bid to encourage more participation of the domestic investors in the market.”