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    CBN Orders Banks to Hand Over Unclaimed Dividends, Dormant Account Funds

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    The Central Bank of Nigeria (CBN) has issued a directive mandating banks and financial institutions to transfer unclaimed dividends and dormant account balances into a CBN-controlled account.

    This decision was outlined in the ‘Guidelines on Management of Dormant Accounts and Unclaimed Funds’ released on Friday.

    The guideline says effective immediately, the CBN will establish and manage an account specifically designated for holding these funds, known as the “Unclaimed Balances Trust Fund (UBTF) Pool Account.”

    The CBN stated that it will oversee the investment of these funds in government securities, subject to approval by the Unclaimed Balances Management Committee.

    The guideline says, “The CBN shall open and maintain an account earmarked for the purpose of warehousing unclaimed balances in eligible accounts. The account shall be called “Unclaimed Balances Trust Fund (UBTF) Pool Account.

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    “Invest the funds in Nigerian treasury bills (NTBs) and other securities as may be approved by the ‘Unclaimed Balances Management Committee’.

    “Refund the principal and interest (if any) on the invested funds to the beneficiaries not later than ten (10) working days from the date of receipt of the request.”

    According to the Securities and Exchange Commission, the total value of unclaimed dividends stood at ₦190 billion as of August 2023.

    The Finance Act 2020, signed into law by former President Muhammadu Buhari, introduced several measures aimed at enhancing the management of unclaimed financial assets.

    One of the key provisions of the Act mandated that any unclaimed dividends of public limited liability companies listed on the Nigerian Exchange Limited (NGX) and any unutilized amounts in dormant bank accounts held by deposit money banks should be transferred to a dedicated Unclaimed Funds Trust Fund.

    This transfer was to occur if the dividends or funds remained unclaimed or unutilized for a period of not less than six years.

    The Finance Act 2020 sought to address the growing concern over large sums of money left idle in the financial system.

    As of August 2023, the Securities and Exchange Commission reported that unclaimed dividends had reached a staggering ₦190 billion.

    Despite the provisions of the Finance Act 2020, the implementation faced legal hurdles. A Federal High Court sitting in Abeokuta intervened by issuing an injunction that temporarily blocked the federal government’s attempt to seize these unclaimed dividends.

    The court’s decision was rooted in concerns over the legality and fairness of transferring private dividends and dormant account funds into government-controlled accounts without adequate notice and due process.

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    The recent directive by the CBN now implements this transfer under its own jurisdiction.

    The timing of this directive coincides with President Bola Tinubu’s recent request for an additional ₦6.2 trillion, raising the 2024 budget from ₦28 trillion to ₦34 trillion.

    To support this increased budget, the federal government is also considering taxing foreign exchange gains of banks.

    Under the new guidelines, banks are required to maintain detailed records of beneficiaries of the unclaimed balances held in the UBTF Pool Account.

    These funds, including dormant accounts and unclaimed dividends, will be invested in Nigerian treasury bills and other approved government securities.

    The CBN has outlined that it will refund the principal and any accrued interest to beneficiaries within ten working days of receiving a request.

    The guideline says, “Where it is imperative to extend the timeline, a notice of extension shall be communicated to the requesting FI stating reasons for the extension.”

    This move aims to streamline the management of unclaimed financial assets and ensure they are utilized in a manner that supports national financial stability.

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