TheCable

BY UGO NWACHUKWU

For most people, investing in the Nigerian Stock market is similar to monkey hunting, with the unwary and naïve as monkeys, sophisticated and powerful investors as Hunters. This can be traced to poor protection of small investors and the dearth of quality investor education.

Investing in shares is far better than investing in Ponzi schemes, yet for many Nigerians, such schemes are preferable, because they are accessible and easy to understand. Unlike the stock market which resembles a fraternity; insular by nature, dismissive of others.

The Security and Exchange Commission (SEC), belatedly, is making effort to protect and educate investors. This effort has focused on unclaimed dividends, which have accumulated to over 90 billion naira. Money owned mostly by small investors who entered the market during the IPO boom period and lost a lot in the subsequent market crash. Claiming these dividends was quite difficult in the past as a shareholder had to own current accounts or specialized savings accounts creating a barrier to claims.

The fact the most of these dividend warrants were less than 200 and quite often, worth less than the paper they were printed on, reduced the desire for claims as the effort required was greater than the returns. The 6-month validity period, the ineffectiveness of the postal system, stress of revalidating made claiming such dividends akin to walking the 3rd mainland bridge.

The move by SEC to replace paper dividends with E-dividends is a step in the right direction, but sadly inadequate. Registering for the e-dividend mandate is not quite as easy as it looks, obtaining the forms, stamping them and submitting to the various registrars, is quite difficult given that most of the registrars’ cluster in Lagos, Abuja, Port Harcourt denying investors residing in other Cities the opportunity to register.

The unclaimed dividend database released by SEC, has aided many Shareholders in locating their dividends, yet was late to launch, reducing available time for free registration. The free registration commenced in 2015 while the database came online 2017. That SEC changed the webpage for checking the database without notice and only put a redirect on April 26 is unfortunate. A fatal flaw in the database creates another problem, LIMBO dividends.

LIMBO dividends are dividends which cannot be claimed because investors do not have the warrants and information are not in the database. This situation arises due to the investor divesting of such shares after dividends payment, thus no   Shareholder number exists. You might wonder how probable this is….I have proof.

In 2014, I owned some Forte Oil stock, which I later sold some months after dividend declaration; the warrants arrived nine months later and were expired. The effort to revalidate was enormous, so I left them.

When I searched the SEC database, there was no information on this dividend. In a scenario where the warrant was lost, how would I claim such a dividend, which I have no proof of, which is not in the SEC database and probably exist only with a registrar? How much would small investors lose by error?

Would this not lead to more losses for investors?

Are there solutions to these issues, yes, can the process be made easier for small investors to secure their investment and obtain their rightful returns no matter how meager it may be. YES!!.The small Investor needs their rights to be respected and not to be exploited by sharks swimming in the market