Minister of finance, budget and national planning, Zainab Ahmed, in a virtual presentation on the highlights of the 2021 Federal Government budget and Appropriation Act on Tuesday, dampened fears of owners of dormant accounts and unclaimed dividends.
She stated, “They have nothing to lose as they would be paid their entitlements from the Special Trust Fund to be set up by the Federal Government once they are properly identified.”
The minister made these clarifications while fielding questions during the virtual presentation.
Ahmed confirmed that N850 billion had been budgeted for the special dividend and trust fund dormant account and also assured that reasonable interest rates would accrue on such funds.
In response to the question on whether the Federal Government intended using the controversial fund to finance its budget deficit, she replied, “The unclaimed dividend and dormant accounts will be pooled into the special trust fund. At any time that a bank or the registrar confirms the validity as to the ownership of such funds, the government would not hesitate to release such funds”.
The minister’s projections were not far-fetched from the truth as this serves as an investment to the general public rather than a scheme to usurp private accounts of the general public for personal gains, as believed by a certain percentage of the general populace.
The misunderstanding emanates from the fact that the general public are of the opinion that the Federal Government is just directly borrowing these funds for their personal gains against their will; however, the government is investing those funds in its debt.
The reason is premised on the fact that retail and corporate investors’ interest in treasury bills has simmered down a lot in the last year, because of how rates have plummeted. As a result, request of funds by the Federal Government from the public does not yield positive results owing to the fact that rates hover around the range of 0% – 1%.
Hence, in an attempt to achieve a ‘win-win’ position, the government decided to invest such funds in their debt as well as invest in unclaimed dividend account holders’ as well, since unclaimed dividend yields zero interest rate (0%). At the point of withdrawal, both the principal and the interest could be obtained.
As for dormant account holders,’ rate of interest accruable on either savings/current account in the long-run would be way less than they would generate if they still invested in treasury bills in the long-run.
Thus, in a nutshell, contrary to the general public belief that the government is usurping public funds for personal gains, the government is rather enriching the owners of these dormant accounts and unclaimed dividends, and it is actually a very smart and strategic step towards achieving the current recovery and resilience development plan embedded within the Economic Recovery Growth plan (ERGP) for 2021.
(BusinessDay)
