Borrowing From Unclaimed Dividends, Others

Borrowing From Unclaimed Dividends, Others

As the Federal Government, FG, continues in its effort to stabilize the economy and steer the nation off recession, it has taken several unparalleled steps that have attracted various responses from an array of both economic experts and analysts. While some applaud FG’s moves, others randomly criticize same; as uninspiring and weak.

However, its latest efforts to steer the economy right is the recourse to borrow funds from unclaimed dividends and dormant bank account balances unattended for at least six years, despite opposition from stakeholders. This resort has become possible courtesy of the 2020 Finance Act which only recently became a legislation.

With the coming into force of the law, which empowers the government to borrow from the two sources, proceeds from the there from will stand as special credit to the FG through the “Unclaimed Funds Trust Fund” as contained in the Act which was recently signed into law by President Muhammadu Buhari.

Part of the law provides that, “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 unutilized for a period of not less than six years 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 trust fund”.

According to the law, the monies transferred to the trust fund will be a “special debt owed by the Federal Government to shareholders and dormant bank account holders”.

The operation of the trust fund will be supervised by the Debt Management Office (DMO) and governed by a governing council chaired by the finance minister and a co-chairperson from the private sector appointed by the president.

Other members of the governing council shall include the governor of the Central Bank of Nigeria (CBN), director-general of the Securities and Exchange Commission (SEC), managing director of the National Deposit Insurance Corporation (NDIC), a representative of the registrars of companies, two representatives of the shareholders’ association, a representative of the Bankers’ Committee with the director-general of the Debt Management Office functioning as the secretary of the trust fund.

The law provides that the original owners of the money can claim it at any time.

But many shareholders and other members of the capital market community had opposed the provisions of the law, saying the government lacks powers to manage funds belonging to private sector investors.

“Dividends are private wealth of investors, either individuals or corporate entities. The idea of converting such private wealth to federal wealth negates the relevant provisions of the rights to own property as guaranteed by the 1999 Constitution. Our opinion is that S39 to the extent of its inconsistency with S44 of the 1999 Constitution (as amended) is null and void.

The law expressly states that there shall be no forceful takeover of any private movable property of any Nigerian without due and appropriate compensation and or valid court order”, shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN) had said.

AljazirahNigeria sympathises with the government in its travail and indefatigable efforts at ensuring stability in nation’s economy in the face of dwindling oil revenues among others, amid growing spending on security and health issues, occasioned by the Covid-19 pandemic.

We align our position with some pundits who fear that unnecessary bureaucracy may hamper a smooth process where dormant and unclaimed dividend account holders get frustrated in the process of retrieving their monies when it becomes expedient to do so. It is therefore necessary for the government to put in place the necessary safeguards that would protect the interest of these account holders at all times.

While we are not against injecting needed financial input through borrowings, there must be some element of prudence in applying the same in order to justify the essence in the first place.

AljazirahNigeria counsels against profligacy and obnoxious appropriation of these funds and urges the government to put watertight checks in order to instill public confidence in the system.

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