If you’re an investor in Nigeria’s capital market, this is your renaissance period. Many must have suffered frustrations over unpaid dividends for years, with the funds lying idle somewhere or with someone or company illegally using it for own gain. Over N80 billion unpaid dividends is
said to have accumulated over the years. But this is going to change. Indeed it is changing already.
The introduction of the E-Dividend by the Security and Exchange Commission, SEC, is changing investors’ confidence in the operations of the capital market. A dividend is a payment made by a company to its share holders. A dividend is paid from profit made after the company has re-invested part of it. It will now pay a proportion of it as dividend to shareholders. It is usually allocated as a fixed amount per share, with shareholders receiving dividends in proportion to their shareholding.
But notwithstanding the volume of the dividend, investors are usually issued paper notice(dividend) many of which remained unclaimed for years for different logistics reasons. But those days appear to have gone with the introduction of E-Dividend last year. The introduction of the e-dividend is designed, according to SEC, to curb the growth of unclaimed dividend in the capital market and allow investors collect dividends electronically. It also allows all accrued dividends to be credited to investors’ Bank Accounts.
There has been a rush by investors to take advantage of the e-dividend following consistent promotion by SEC. There have however been hiccups with the process. It is a slightly cumbersome process involving approaching your stockbroker, filling e-dividend forms of the respective registrars for each of the companies one has shares in and going back to your bank and all that.
This is why SEC extended the deadline for registration to 30th June, 2017. The E-Dividend enrolment is free of charge as the cost is borne by SEC. It is part of effort to encourage investors to embrace the platform and ensure they benefit from it.
The programme has achieved remarkable progress as about 48% of investors have already mandated their Bank Accounts for the e-dividend payments. Arising from this exercise, over N30 Billion which was hitherto unclaimed have so far been credited to respective Bank Accounts of Investors.
The e-dividend has the added benefits of ensuring that you never lose your dividends and that they get paid to you on time. A typical e-dividend form will contain the name of the bank which you intend your dividend to be paid into, the address of the bank, Nuban Bank account number, sort code, the name and address of the shareholder, name of stockbroker, email address, company seal (if it is a registered company) and so on. At the expiration of the free period of registration, SEC has said Dividend warrants will no longer be issued as it would be replaced with electronic dividend payments. The decision no doubt underscores the Commission’s strong focus on market development and enhancement of investor confidence.
It is also the reason SEC has strengthened its regulatory and enforcement capacity to check quackery and corruption in the capital market.The Investments and Securities Act (ISA) 2007 and the Rules and Regulations made pursuant to the Act, are enforced by SEC to ensure the protection of investors and their investments in the market. SEC’s powers have also been widened to include regulating the capital market with a view to protecting investors; and developing the capital market in order to enhance its allocative efficiency, and pave the way for a private sector led economy.
SEC has no doubt been upbeat in efforts to grow and deepen the capital market. In the last four months it had treated not less than ten cases of market infractions, with at least three cases handed over to the Economic and Financial Crimes Commission, EFCC or the police.
The latest is that of an illegal operator carrying on business under the name of Yuan Dong (YDEC). The Company parades itself as an Investment Company, extending invitations to unsuspecting members of the public to subscribe in a scheme identified as a Resources Investment Account. Investments in the scheme range from a minimum deposit of ₦10, 000 to a maximum deposit of ₦240,000.
The investment period of the scheme is pegged at a minimum of 30 working days to a maximum period of 10 months with offer of interest rates on short and medium term basis, which include promise of a daily profit of ₦80.00 and ₦2,400 depending on the category of investment. The company also entices its customers with payment of bonuses should they convince more investors to invest in the scheme.
The Commission conducted an investigation into the activities of the company and established that its activities constitute a breach of the Investment and Securities Act (ISA), 2007. Furthermore, it was discovered that contrary to their supposed existence in over 20 locations across the country, the company only has functional offices in Asaba, Kano and Abuja.
The Promoters of the company were arrested and handed over to the police for further investigations. Such proactive interventions are needed to sanitize the market and boost investors’ confidence.
Investors also have a role to play in order to rid the capital market of illegal operators. An investor must exercise caution and perform due diligence on operators before making investments decisions.Members of the public must confirm the licenses of firms they intend to invest with before going ahead. And it is not difficult to do this. Valid Licenses of lawful operators can be obtained on SEC’s website.
Nigeria capital market is certainly on the rise, and poised more than ever before to support national growth. The 2017 budget may be passed, if the senate president is to be believed, by May 11, nearly two months into the second quarter of the year. The N7.298 trillion budget has a staggering funding gap of N2.36 trillion, effectively providing a leeway for the capital market to support the mobilization and deployment of resources to fund the budget deficit.
For the capital market to be able to more effectively support the process and contribute to the actualization of the budget, SEC last February organized a round-table that drew participation of major stakeholders in the capital market. One of the key decisions made by stakeholders is for government to immediately begin the process of privatisation of government assets and give the capital market an active role in the process.
It will not only release funds for government but would also create efficiency as scarce resources being committed to manage these assets can be freed up and channelled to critical sectors of the economy.