Nigerian government targets over N895bn of dormant balances, unclaimed dividends
The Nigerian government has set a 2021 target to 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 measure reported by the Central Bank of Nigeria (CBN) is in response to the hard-pressed situation for additional sources of funds to plug the continued increase in revenue shortage.
It 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 Finance Act 2020, section 77, 1-3 states that:
“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 (NBS).
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.
Further informations 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.
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.
He said: “ I have not had the privilege of reading the law. But from information going round, 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.”
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.
“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.
Suzan O
