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Issuing Houses consider N50bn unclaimed dividend for Repo transactions

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As foreign liquidity constraints continue to impair the performance of Nigerian equities, Nigerian issuing houses are proposing how liquidity can be created in the market by looking inwards.

One of the considerations is creating a repurchase agreement (repo) market for securities. They also believe Nigeria’s capital market can put to positive use, unclaimed dividends currently lying idle in banks for repo transactions.

A repurchase agreement, also known as a repo, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price is always greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate.

These among others were part of the discussions at the 1st quarter 2015 meeting of the Association of Issuing Houses of Nigeria (AIHN), which FMDQ OTC plc sponsored. Also at the meeting, FMDQ discussed its ‘Strategic Plan for the Debt Capital Market’ – with further emphasis on the value-add for the Listings & Quotations business on FMDQ platform.

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The Institute of Capital Market Registrars (ICMR) had put the unclaimed dividends in the nation’s capital market at N50.94 billion as at December 31, 2013.

“This is a good way to put everybody’s interest together. Some of these monies will never be claimed again. The registrars are not doing their best in that direction. Let us support this initiative to use unclaimed dividend positively for market liquidity. It is for the interest of everybody –the registrars and the market”, said Victor Ogiemwonyi, president, Association of Issuing Houses of Nigeria.

“I know that Securities and Exchange Commission (SEC) is looking at our proposition. Everybody in the market should try and support this initiative because it is for the interest of the market,” Ogiemwonyi who is also the CEO of Partnership Investment Company Plc further said.

“The market has to device a means of not relying on foreign investors for liquidity. SEC said unclaimed dividends can’t be used by the company but it has to be invested outside the company.

“We need to begin to support the market by positively using this money. This can be started with investment in liquid stocks before illiquid stocks,” Sonnie Ayere, CEO, Dunn Loren Merrifield said.

Walker Ogogo, Chief Executive Officer, Institute of Capital Market Registrars said, “The market as a whole, is seeing unclaimed dividend as a major problem. The idea of using unclaimed dividend to create liquidity in the market is a welcome development.” 

According to Emeka Madubuike, chairman, Association of Stockbroking Houses of Nigeria (ASHON), “The question we need to ask is: unclaimed dividend, who has final control of them? Is it the companies or the registrars?” He believes that the market needs to establish answers to these questions, to know who has the jurisdiction over the unclaimed dividends monies.

Iheanyi Nwachukwu