A final resolution of the rising unclaimed dividends issue will restore investor confidence, enhance market participation, and unlock the full potential of the Nigerian stock market as a catalyst for broader economic growth, writes Festus Akanbi

In Nigeria, one big discouragement to investment opportunities in the stock market is the uncertainty of such investment, this time in the form of shares of quoted companies bought and which can be resold for future financial needs by the owners or handed over to children or relatives as inheritance upon the death of the owners.

A dividend is a portion of a company’s profits distributed to its shareholders, typically in the form of cash or additional stock.

However, some of these shares are easily forgotten or abandoned by their owners as a result of death, faulty documentation during share purchase and the failure of company registrars to do the needful, therefore raising the volume of unclaimed dividends and discouraging potential investors in the capital market.

Today, the rising number of unclaimed dividends in Nigeria poses a significant threat to the growth of the capital market and the broader economy.

Analysts said this undermines investor confidence and discourages both retail and institutional participation in the equity market.

This is because, when investors are unable to access their rightful returns, they become disillusioned, leading to reduced reinvestment and lower market liquidity. This weakens the capital formation process, hampers the mobilisation of long-term funds for businesses, and ultimately slows economic development.

Analysts are of the view that addressing this issue is crucial for restoring trust, deepening market participation, and fostering sustainable economic growth.

SEC’s Marching Orders

This is why last week’s directive of the Securities and Exchange Commission (SEC), asking companies and their registrars who default on paying unclaimed dividends to shareholders to honour the provisions stated in the Finance Act 2020, could not have come at a better period.

The apex regulator in the capital market issued the directive in a statement on Tuesday, June 10, and also stated that shareholders can now claim up to 12 years of unclaimed dividends, adding that its directive aligns with Section 60 of the Finance Act 2020.

“The attention of the Securities and Exchange Commission has been drawn to the fact that paying companies and their Registrars have continued to treat unclaimed dividends of public companies that are older than 12 years as being “statute-barred” without recourse to the provisions of the Finance Act 2020.

“Pending the setting up and operationalisation of the (Unclaimed Fund Trust Fund), UFTF by the Federal Government, under its powers under Sections 3 (4) (e) and 93 of the Investments and Securities Act 2025, the Commission hereby directs public companies and their Registrars to continue to honour all requests by shareholders for the payment of unclaimed dividends as described above, with effect from December 31, 2020,” it stated.

The SEC stressed that public companies and registrars are required to effect immediate compliance with this directive and submit periodic reports on the same in the manner prescribed in the commission’s rules and regulations.

In Nigeria’s unclaimed‑dividend controversy, “statute‑barred” refers to the legal provision under the Companies and Allied Matters Act (CAMA) that any dividend not claimed within 12 years becomes statute‑barred, meaning the shareholder permanently loses the right to claim it.

The directive clarified that the import of the provisions of Section 60 of the Finance Act 2020 is that where dividends declared by a publicly quoted company on the Nigerian Exchange Limited remained unclaimed for six years or more, such dividends are expected to be transferred to the Unclaimed Funds Trust Fund (UFTF).

Growing Volume of Unclaimed Dividends

Analysts said that the unclaimed dividend crisis, which, according to reports, currently stands at a staggering N215 billion, has raised questions about the effectiveness of the systems in place to manage shareholder dividends and the larger implications for investors, especially in terms of trust and confidence in the market.

In August 2024, the SEC reiterated its commitment to resolving the lingering issue of unclaimed dividends through the deployment of advanced technology solutions and improved stakeholder engagement. The Director-General of the commission, Emomotimi Agama, acknowledged the challenge posed by the mounting unclaimed dividends and vowed to reduce this backlog.

According to reports, in 1999, unclaimed dividends stood at N2.09bn, but by 2015, the figure had skyrocketed to N90bn. The trend continued as the figure reached N158.44bn in 2019, N168bn in 2020, and N177bn in 2021. Most recently, by 2023, the amount surged to N190bn and currently stands at N215bn, underscoring persistent challenges such as outdated processes, lapses in record-keeping, and systemic barriers to claims. Experts said the alarming increase reflects the urgent need for reforms to address the structural causes of the growing problem.

The unclaimed dividend crisis has been an issue for many years and has only gained significant traction in the last decade as more and more shareholders have come forward with complaints. The introduction of the e-dividend system, which was meant to streamline the process of dividend payment and distribution, has helped somewhat by reducing the time and effort required for claimants to access their funds. However, it has not completely solved the problem, and in some cases, it has added more layers of complexity.

Apportioning Blames

Capital market watchers argued that a large portion of the issue lies in the role of registrars, the entities responsible for maintaining accurate shareholder records and processing dividend payments. Registrars have often been criticised for poor record-keeping, inefficient responses to enquiries, and a lack of accountability in managing shareholder data. This, they pointed out, has contributed to a situation where dividends are either not paid out on time or remain unclaimed due to systemic failures.

The dividends in question are earnings distributed by companies to shareholders, often from investments made during the IPO booms of the late 1990s and early 2000s. Many investors either failed to update their details with registrars, lost share certificates, did not open a Central Securities Clearing System (CSCS) account, or simply forgot about the investments entirely.

In other cases, the next of kin do not know inherited shares, leaving billions of naira unclaimed across multiple registrars. This situation has left countless Nigerians disconnected from their investments. With current economic pressures and rising inflation, the existence of such a vast pool of unrecovered personal wealth has taken on greater urgency. Yet, for many, navigating the complexities of the capital market, particularly regarding dividend recovery, remains a challenge.

According to the Group Managing Director of Fundvine Holdings, a licensed Nigerian investment and capital market firm committed to helping Nigerians recover what is rightfully theirs, Dr. Michael Enyinna Kasarachi, the unclaimed dividend crisis is as much a systemic failure as it is a personal loss.

“It is deeply concerning that in an economy where many are struggling financially, billions in rightful earnings remain untouched. Our mission is to reconnect Nigerians to their lost investments through proper guidance and regulatory compliance.”

Shareholders Call for More Sensitisation

The National Coordinator of the Progressive Shareholders Association of Nigeria, Boniface Okezie, emphasised the need for legislative reform to address the crisis. He argued that the statute of limitations on unclaimed dividends, as outlined in the Companies and Allied Matters Act, must be reviewed.

“The law says after 12 years, if no shareholder comes forward to claim dividends, it must revert to the companies that declared them. Why are they jettisoning that provision of the Companies and Allied Matters Act? SEC must call for an amendment of that section of the law,” Okezie stated.

He also called for more public awareness campaigns, particularly for grassroots investors. “The SEC must embark on enlightenment programmes with other stakeholders. The immediate past administration of the SEC under the leadership of Gwazo introduced e-dividends, but that has not solved the issue entirely. The message has not gotten to the grassroots or even urban dwellers,” he said.

The good thing is that the SEC expects the directive to take off immediately, and it has stated its determination to hold the companies and their registrars accountable going forward. The Head, External Relations Department, Mrs. Efe Bello, in an interview with THISDAY explained that public companies and registrars are required to effect immediate compliance with this directive and submit periodic reports on the same in the manner prescribed in the commission’s Rules and Regulations.

“Normally, when they submit these reports, we analyse them, and any company that is not complying will be sanctioned accordingly,” Ebelo stated.

The enforcement of the SEC’s directives will certainly restore investors’ confidence and make companies and registrars  more accountable.