OPINION: FG’s N100bn Unclaimed Fund Borrowing Legal, But Trust Must Lead

The development, in my view, needs to be situated within its proper legal and policy context. The Federal Government’s decision to book N100bn from the Unclaimed Funds Trust Fund as a domestic borrowing instrument is legally grounded in the Finance Act 2020. That Act explicitly set up a perpetual trust, allowing these idle assets- unclaimed dividends and dormant account balances- to be warehoused and temporarily deployed by the state, pending claims by beneficiaries.

Furthermore, to be fair: Nigeria is not entirely alone in this practice. Several established jurisdictions, including parts of the United States and Canada, have escheatment laws that allow the state to take temporary custody of abandoned financial assets for public benefit, often reinvesting them in government securities. So, the principle itself is not rogue.

That said, legality does not automatically eliminate concerns. The more important issue is how transparently and prudently the arrangement is managed, given that these are ultimately private funds held in trust.

From an investor’s perspective, the implication is quite nuanced. On one hand, it reinforces the idea that unclaimed dividends and dormant balances are not lost but remain recoverable, even if they are being utilized in the interim. This could be reassuring if the system works efficiently. On the other hand, it raises questions about accessibility and the ease with which investors can reclaim their funds when needed. If the process becomes cumbersome or if there are delays in repayment, it could erode confidence in the market. Investors are looking for assurance- not only that their funds are protected in principle, but that they can access them easily and without delay when needed. The credibility of institutions like the Debt Management Office and the Central Bank of Nigeria will therefore be central to sustaining trust.

As for the broader market impact, it could cut both ways. In the short term, the amounts involved are relatively small compared to Nigeria’s overall domestic debt stock, so the direct market effect may be limited. However, perception matters greatly in capital markets. If investors interpret this as a sign of government overreach into private assets, it could dampen sentiment, particularly among retail investors who are already sensitive to issues around dividend access and account management.

Conversely, if the framework is implemented with strong safeguards- clear record-keeping, prompt repayment mechanisms, regular disclosures, and independent oversight- it could demonstrate financial innovation and improve asset utilization without undermining ownership rights.

Therefore, for the market to avoid a negative spiral, three safeguards are non-negotiable. First, a publicly accessible, real-time digital registry where any investor can instantly verify if their funds have been transferred and what interest has accrued. Second, an ironclad, automated repayment mechanism that truly honours the ten-working-day refund promise without bureaucratic excuses.

Third, an independent oversight committee- not just CBN, DMO and SEC insiders- with investor representation to audit the fund annually. Without these, the market will view the UFTF not as a clever financing tool but as a quiet expropriation waiting to happen.
Ultimately, the sustainability of this policy will depend on trust.

The government must ensure that this is not seen as a convenient fallback for deficit financing, but rather as a carefully managed trust arrangement. Strengthening claim processes, enhancing public awareness, and ensuring strict accountability in the management of the fund will go a long way in preserving investor confidence and maintaining the integrity of the capital market.

-Prof Uche Uwaleke is the President, Capital Market Academics of Nigeria