– Vow To Challenge The Act In Court
BEVERLY HILLS, January 07, (THEWILL) – The move by the Nigerian government to take over about N895.5 billion in quoted companies and deposit money banks, as “special borrowing” to fund crisis-related expenditures, has drawn the irk of concerned Nigeria’s stakeholders.
The amount represents unclaimed dividends (standing at N158 billion) and dormant bank balances (N737.5 billion) in the affected financial services sub-sectors.
The concerned stakeholders, operating under the aegis of registered shareholders’ associations, are opposed to the enforcement of the recently enacted Finance Act which empowers the government to “borrow” unclaimed dividends and dormant account balances not less than six years old.
Section 77, 1-3 of the Finance Act stipulates, “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.”
The enforcement of the Act came as a surprise to the stakeholders who argued that various investor groups had opposed the idea at the public hearing stage of the Finance Bill at the National Assembly.
According to them, the move amounts to undue confiscation of individual and groups’ assets by the government as the word “borrow” is a misnomer and not in tandem with the conventional meaning of obligations inherent in transactions between a debtor and a creditor.
The National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, expressed dismay over the enforcement of the section of the Finance Bill that empowers the government to “borrow” equity investors’ and bank depositors’ assets unilaterally.
“This is not right; how can the government take over investors’ assets in the name of borrowing without the consent of the owners of the assets?
“People use their hard-earned money to buy shares in quoted companies, they pay prescribed statutory taxes such as withholding tax, value added tax, company tax, income tax – as the case may be.
“The companies should be allowed to warehouse the unclaimed dividends and, possibly, invest them to yield returns for shareholders”, Okezie said in an email to THEWILL.
He added that the stakeholders would challenge the Act in court as it operates in contravention of the Nigerian Constitution.
The National Coordinator, Pragmatic Shareholders Association, Mrs Bisi Bakare, told THEWILL by telephone that her group would challenge the Law in court because the members were opposed to it from the outset.
According to her, the companies had deducted the necessary taxes from the dividends and paid the required corporate taxes to the government, it would be unfair to collect taxes from investors’ dividend and turn round to “confiscate” the same dividend in the guise of “borrowing” under a Trust Fund.
“My group is totally against it and we are going ahead to challenge the Law because, fundamentally, it is against the provisions of the Constitution that allows citizens to own assets in any part of the country.
“We opposed it at the National Assembly Public Hearing in Abuja and we made it clear that it was a bad Law that must not be allowed to operate.
The Chairman, Ibadan Zone Shareholders’ Association, Eric Akinduro told THEWILL that his group will proceed to challenge the Act soonest.
He stressed that the shareholders’ associations were vocal in their opposition against the move during the Public Hearing on the Finance Bill in Abuja, and described the government’s action as insensitive and against natural justice.
“It cannot work in a sane society – to unilaterally “borrow” money that does not belong to you and tell the owner to begin to file a process for recovering his money”.
He blamed the regulatory authorities for not doing enough to determine and locate the owners of the unclaimed dividends and revealed that some people could not bear the rigour of claiming their dividend was already categorized as ‘Unclaimed’.
“This arrangement will not work; it is inhuman, it will not help our economic development,” Akinduro said in a telephone chat.
In his reaction, leader of the Trusted Shareholders Association of Nigeria, Mukhtar Mukhtar, expressed skepticism over the government’s ability to apply the proceeds of the unclaimed dividend judiciously to benefit the people.
“A cross-section of shareholders’ forums opposed the idea of ‘borrowing’ investors’ unclaimed dividends and bank depositors’ balances by government in any guise.
“What can we do, aside from voicing our disapproval? But, will the government listen?
“At this stage, the only thing we can do is to advise the government to ensure that these monies are put into proper use.
“Since the government has made up its mind to ‘borrow’ the monies that belong to individuals and groups unilaterally, we would like to see a positive outcome from it,” Mukhtar said in an e-mail to THEWILL.
This newspaper learnt from a National Assembly source that the dormant account was initially not part of the original Finance Bill.
He revealed that bank dormant account balances were added to the provisions of the Act following the suggestion by an unnamed influential legislator, a development that has created anxiety among the deposit money banks.
A top management banker in Lagos described the inclusion of dormant bank account balances in the Bill as “a kill”.
“How would anyone conceive such a retrogressive idea at this time?
“Government has deprived the banks from benefiting from its deposits through the Treasury Single Account (TSA) policy; there is no problem about that.
“Turning round to mop up dormant account balances is a kill,” the new generation top banker said on condition of anonymity.
As at May 2020, there are N44.5 million dormant bank accounts, according to data from the Nigeria Inter-Bank Settlement System (NIBSS).
Reports show that dormant account balances constitute about 2.5 per cent of total deposits of banks standing at N29.5 trillion as of September 30, 2020, according to the National Bureau of Statistics (NBS).
By this, about N737.5 billion stands in dormant bank account balances as of that date; with N158 billion unclaimed dividend, the total being “borrowed” by the government amounts to N895.5 billion.
The Central Bank of Nigeria guidelines describe dormant bank accounts as accounts not operated within a period of 12 months.
