Cash woes: FG after dormant accounts, unclaimed dividends

…N895bn accumulated as unclaimed dividends, dormant account funds

…Bankers surprised, unaware

“From the commencement of this Act, any unclaimed dividend of a public limited liability company quoted on the Nigerian Stock Exchange and any unutilised amounts in a dormant bank account maintained in or by a deposit money bank which has remained unclaimed or unutilised for a period of not less than six years from the date of declaring the dividend or domiciling the funds in a bank account shall be transferred immediately to the Unclaimed Funds Trust Fund.”

—FINANCE ACT 2020, SECTION 77, 1-3

By Babajide Komolafe, Nkiru Nnorom, Rosemary Onuoha & Elizabeth Adegbesan

Hard-pressed for additional sources of funds to plug the continued increase in revenue shortage, the Federal Government will this year take over N895 billion from banks and quoted companies representing unclaimed dividends and dormant bank balances as special borrowing to fund crisis related expenditures.

This follows the provision of the Finance Act 2020 which empowers the FG to take over unclaimed dividends and dormant account balances unutilised for more than six year as special credit through the Unclaimed Funds Trust Fund.

The Act states: “From the commencement of this Act, any unclaimed dividend of a public limited liability company quoted on the Nigerian Stock Exchange and any unutilised amounts in a dormant bank account maintained in or by a deposit money bank which has remained unclaimed or unutilised for a period of not less than six years from the date of declaring the dividend or domiciling the funds in a bank account shall be transferred immediately to the Unclaimed Funds Trust Fund:

“Provided that this section shall not apply to official bank accounts owned or belonging to the Federal Government, State Government or Local Government, or any of their Ministries, Departments or Agencies.”

CBN Guidelines define dormant accounts as any account not operated by the owner for more than one year. According to data from the Nigeria Inter-Bank Settlement System (NIBSS), as at May last year, there are 44.5 million dormant bank accounts.

Vanguard investigations show that dormant account balances constituted about 2.5 per cent of total deposits of banks, which stood at N29.5 trillion as at September 30th, 2020, according to data from the National Bureau of Statistics.

Thus, the amount of money in dormant account balances is about N737.5 billion. When combined with the N158 billion outstanding unclaimed dividends, the total amount of money that would be taken over by the FG may be up to N895.5 billion.

Vanguard investigations further showed that the original version of the Bill was limited to Unclaimed Dividends and did not include dormant bank account balances. Industry sources disclosed that the dormant account balances were included following a suggestion by a leading legislator during the public hearing on the bill.

Further investigations also showed that the banks may be unaware of the inclusion of dormant account balances in the Act.

Bankers surprised, unaware

Some bankers who spoke to Vanguard on condition of anonymity expressed surprise, saying they are not aware of the inclusion of dormant account balances in the Act.

READ ALSO: Unclaimed dividend rises 32% to N158.4bn

A CBN source also denied knowledge of this development, saying, “This is the first time I am hearing about this.”

The inclusion of dormant account balances in the Act, according to Dr. Uju Ogubunka, President, Bank Customer Association of Nigeria (BCAN) indicates desperation on the part of the government.

Novel development, says BCAN leader

He said: “ I have not had the privilege of reading the law. But from information flying around, it does appear to me that this is a novel development that signifies, at best, desperation.

As it is well known, in every creditor-debtor relationship, there is always a known creditor and a known debtor. From your write-up, the government will be the known debtor; but who is the known creditor?

“Creditors always attempt to secure their positions against default by debtors, except they want to be gratuitous, by taking collateral from prospective debtors. What collaterals will the government provide?

“More importantly, creditors give serious consideration to credit-worthiness of prospective borrowers. What is the credit-worthiness of the government? In other words, is the government credit-worthy?

“If you answer these questions, you will appreciate whether or not the government should be allowed to go the way it is intending”

‘Dividends should go to shareholders’

Speaking on the issue, Chairman of Nigerian Insurers Association, NIA, Mr. Ganiyu Musa said that it is better for stakeholders to create a mechanism through which unclaimed dividends can get to the owners rather than what is being dictated in the finance bill.

Musa said: “A number of commentators have suggested different mechanisms in terms of ensuring that shareholders have access to their dividends. Rather than leave it according to the dictates of the Finance Act, I would have thought that focusing on the mechanism to get the unclaimed dividend to the owners be instituted. Such mechanism should be extended to the companies and it should be left to the companies to manage the funds but the Federal Government should come up with a regulation to compel the companies to identify those shareholders and give them their dividends,” Musa stated.

‘Good, if used to effect’

Commenting Ambrose Omorodion, CEO/Chief Research Officer, Invesdata Consulting Limited, said: “It’s obvious that government revenue has been affected by the coronavirus outbreak, which has further weakened the government spending and execution of projects as deficit border widened.

“The effective use of the fund will boost economic recovery and activities that will impact positively on the shareholders, companies, customers and others because a booming or prosperous economy will reflect on investors and consumers’ confidence.”

He, however, said that the companies and banks that hitherto depend on the funds would be affected especially the old generation banks that have been feeding fat on dormant accounts due to death of the account owners/shareholders and inability of the family members or beneficiaries of the deceased to access the money.

He opined that the Act has removed the fear of investors losing their unclaimed dividend, now that it is made clear that owners or investors can claim their money any time they show up.

“To me, it is a welcome development if the fund is judiciously used for the purpose of driving economic development and growth,” he added.