BORROWING FROM THE UNCLAIMED: AN EXAMINATION OF THE LEGALITY OF DIVERTING THE UNCLAIMED FUNDS TRUST FUND TO FINANCE GOVERNMENT LOAN SCHEMES IN NIGERIA1
1. Introduction
A pattern is emerging, one where private-owned monies are being diverted for public borrowing without the notice or express consent of the legal owners. In August 2026, President Bola Tinubu proposed the use of unclaimed dividends and dormant accounts funds to fund the Nigerian Education Loan Fund (“NELFUND”). Dr. Maruf Alausa, the Minister of Education, informed the public that cross ministerial efforts have commenced between the Ministries of Education, Finance and office of the Attorney-General of the Federation towards removing legal hurdles and operationalising this directive.2 It is easy to sympathise with a policy goal that channels idle money toward education financing, especially as NELFUND’s obligations grow faster than its funding. However, good intentions do not erase the legal complexities surrounding the means to pursue those good intentions. Prior to this, it was announced that ₦100 billion of the ₦242 billion3 that make up the Unclaimed Fund Trust Fund had been used for debt financing in December 2025.4
The Unclaimed Funds Trust Fund (“UFTF”) was created under section 77 of the Finance Act 2020 as a perpetual trust to house unclaimed dividends of a public limited liability company and any unutilised amounts in a dormant bank account which has remained unclaimed or unutilised for a period of not less than six years. All funds transferred to the UFTF become a special debt owed by the Federal Government to the shareholders and dormant account holders and can be claimed by them at any time. This raises the central legal question this article seeks to answer, which is whether a trust fund created for a specific purpose and owed as a special debt to private citizens can be lawfully redirected by an executive directive to fund a public borrowing scheme without amending enabling laws or obtaining the consent of, or providing further protection for the owners of the money.
To fully consider the legal question set out above, this article will first discuss the legal framework regulating unclaimed dividends and dormant accounts, before examining the specific NELFUND directive as a case study. This paper further considers the extent such directive complies with property rights as entrenched in the Constitution while examining the separation of powers between the Executive Arm and the National Assembly. Additionally, the article weighs the competing pressures of fiscal necessity against legal integrity and concludes by proposing recommendations which will protect private interests while meeting public needs.
2. Legal Framework for Unclaimed Dividend and Dormant Account Funds
The Companies and Allied Matters Act 2020 (“CAMA”)5 regulates how a company, whether private or public, may handle unclaimed dividends. Under the CAMA, companies are mandated to publish lists of unclaimed dividends alongside the names of persons entitled to it in national newspapers and attach such publications to the notice sent to members before annual general meeting of the company.6 Notably, the Act enables companies to invest the unclaimed dividend for its own benefits and retain the interests accrued. Unclaimed dividends are still preserved as special debts due and recoverable within 12 years, but after which they should be distributed to other shareholders of the company.7
The Banks and Other Financial Institutions Act 2020 (“BOFIA”)8 directs financial institutions to keep a separate register for dormant accounts and to make efforts to locate the account holders.9 Similar to the provisions of the CAMA, the BOFIA allows banks to invest the funds in a dormant account after ten years with no claims, and such investments would be preserved on behalf of the claimant. In 2024, the Central Bank of Nigeria ("CBN") released a circular to enforce the provisions of the BOFIA on dormant accounts10 which also set out the procedure to reclaim unclaimed balances. The circular announced the Unclaimed Balances Trust Fund (“UBTF”) which the CBN is expected to open and maintain for unclaimed balances. The funds in the UBTF may also be invested in Nigerian Treasury Bills and other securities approved by the management committee.
The Finance Act 202011 in section 77 created the Unclaimed Funds Trust Fund which is made up of unclaimed dividends by a public limited liability company quoted on the Nigerian Stock Exchange (“NSE”) and any unutilised amounts in a dormant account which has remained unclaimed or unutilised for six years from the date of declaring the dividend or depositing the funds in the account. As may be construed from the foregoing, unclaimed dividends from private companies or public companies not quoted on the NSE are exempted from transfer into the UFTF and compliance avoids the statutory penalties imposed by the Act. A defaulting company or financial institution would be found guilty of an offence and subject to a fine of not less than five times the value of the unclaimed dividend or unutilised funds in the dormant bank account. The perpetual trust is to be jointly managed by the Debt Management Office (“DMO”), the Central Bank of Nigeria (“CBN”) and the Securities and Exchange Commission (“SEC”). They serve different functions as the DMO supervises the trust fund, while the CBN manages the UBTF as a sub-fund under UFTF and the SEC is charged with investor protection to ensure beneficiaries reclaim their monies. The UFTF is established as a sub-fund of the Crisis Intervention Fund that may be utilised for making funds available to meet expenditure as provided in the Annual Appropriation Act to meet any crisis related expenditure.12 To the extent that the Federal Government draws on the UFTF, it is recorded as part of the domestic debt stock.13
Notably, the UFTF is subject to section 44(1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) which protects private property from compulsory acquisition except in the manner and for the purposes as prescribed by a law that, among other things, requires payment of compensation. Evidently, the drafters of the Finance Act recognised the need to reiterate the supremacy of constitutionally backed property rights while pooling private funds to be accessed by the Federal Government. Additionally, the establishment of the trust fund is subject to trust laws as section 44(2)(h) states that nothing in the section shall be construed as affecting any general law relating to trust and trustees. Thus, the funds in the UFTF are protected from appropriation without compensation and the relationship between the Federal Government of Nigeria (FGN) and owners of the funds in the trust fund is regulated by general trust laws.
3. Legal Status of the Funds: Trust, Debt or Public Revenue
The UFTF is designed as a pool of privately owned assets over which the FGN has control subject to a special debt liability to the shareholders as beneficiaries of the trust. The trust fund is statutorily characterised as both a ‘trust fund’ and a ‘debt’ to the shareholders with the FGN having competing interests as both the trustee and the debtor. The Finance Act 2020 describes the Fund as a perpetual fund which means that it is designed to continue indefinitely and any beneficiary that resurfaces at anytime may still lay claim to it.14 It may seem as though the creation of the fund removed the previous 12-year limitation period within which a claimant could recover unclaimed dividends to the current position, which requires that dividends unclaimed for a period of six years or more and transferred to the UFTF may be claimed at anytime notwithstanding the earlier provisions. However, it is safe to assume that unclaimed dividends which have not been transferred are still subject to the actionable limit of 12 years as confirmed by the SEC.15
A trust is described as an equitable obligation binding a person (who is called the trustee) to deal with property over which the trustee has control (which is called trust property) for the benefit of the persons (who are called beneficiaries or cestui que trust), of which he may himself be one.16 As a trustee, the Federal Government owes a fiduciary duty to the shareholders to properly preserve the trust fund, provide information to the beneficiaries on demand with an obligation to transfer the assets to its owner upon establishing his/her claim.17 The foundational rule of “sole interest” in trust law which states that the trustee owes a duty of loyalty to administer the trust solely in the interest of the beneficiary and avoid any conflicts of interest is applicable in this instance.
On the other hand, debt has been defined as ‘a sum of money due by contract or by a certain and express agreement’.18 Therefore, the borrowing of money requires the express notice and consent of the creditor first had and obtained by the debtor usually with a maturity date attached. It is worth considering whether the use of the term ‘special debt’ legally bypasses these common requirements. This is especially important given that the UFTF is statutorily established as a sub-fund to the Crisis Intervention Fund to prevent idle funds from lying fallow. Where the trust fund is converted to a special debt owed by the government to its beneficiaries, it could be argued that the Finance Act serves as notice to the beneficiaries of the UFTF and avoids the requirement of consent. Moreso, consent could not be readily obtained given the large number of beneficiaries and their failure to claim the funds. However, public borrowing from the trust fund by the trustee still amounts to self dealing and falls short of the trustee’s duty to act in good faith. As a debtor, the State appears to act in its own financial interest,19 potentially placing the funds beyond the reach of their rightful owners and thereby undermining the UFTF’s primary purpose of identifying beneficiaries and reuniting them with their funds.
Furthermore, a trust is subject to the trust deed or document creating the trust which spells out the duties and powers of the trustee. While the Finance Act 2020 cannot typically be labelled a ‘trust deed’, it is the foundational authority that establishes and lays down the terms of the trust. One of the purposes of the UFTF is providing access to the FGN to use otherwise idle funds to shore up crisis related fiscal expenditure provided in the Annual Appropriation Act. Thus, the dual characterisation of the UFTF as both a ‘trust’ and ‘special debt’ intentionally proposes the object of the trust as primarily preserving unclaimed dividends for shareholders upon claim while utilising it for the country’s fiscal demands.
4. Diverting UFTF and UBTF to public borrowing schemes as a fiscal policy
The controversy did not arise from the creation of the UFTF itself, but from the executive directive diverting private funds into public borrowing schemes. The President’s directive proposing the diversion of unclaimed dividends and funds from dormant accounts follows the domestic debt stock report from the DMO that the UFTF contributed about 0.12 per cent to the FGN’s total domestic debt which is a total of N100 billion naira. The Federal Executive Council also approved an earlier directive by President Tinubu directing the funds recovered by the EFCC to NELFUND. Thus, the UFTF and recovered funds have been lumped together for the purpose of funding the education loan scheme. While the scheme serves a legitimate utilitarian purpose, treating privately owned assets and funds which have been judicially confiscated is legally tempestuous. The instruction to the Attorney-General of the Federation to review the laws to see how the diversion of UFTF into NELFUND can be legally compliant is telling. It inverts the ordinary sequence in which legal authority is first established and subsequently adopts policies to operationalise the directive. In this instance, the policy is announced first and legal justification is subsequently commissioned to bring the policy in compliance with the law.
In an attempt to legally justify the diversion, it could be argued that one of the duties of the federal government is the duty to invest,20 and thus the recent directives are in consonance with this duty. However, a Trust investment must have the prospects of producing income.21 Borrowing the words of author G. Watt, “an investment is something that is acquired in the expectation that it will produce profit in the form of direct financial returns.”22 Therefore, whatever investments the FGN through the governing council of the UFTF makes, it must result in direct financial returns to the owners of the unclaimed dividends and dormant accounts. A trustee cannot make investment decision on nonfinancial considerations that is not in the best interest of the beneficiary.23
Additionally, the Trustee Act 1893, being a statute of general application and the Trustee Investment Act24 are instructive as they provide guidelines to the trustee on the types of investments they can make. Notably, the Acts facilitate rather than regulate investment of trust funds by the trustees as held in the case of Fasel Services Ltd & Anor v Nigerian Ports Authority & Anor25 where the Supreme Court unanimously upheld the investment of pensions trust fund in a private company despite not being provided for in the Trustee Investment Act.
After considering the above, suffice it to say that NELFUND does not qualify as an investment that a trustee is authorised to make. NELFUND was established by the Student Loans (Access to Higher Education) Act 2024 which replaced the flawed 2023 version. It was originally established as an interest-free loan under the defunct 2023 Act. However, the 2023 Act neither retains the interest-free designation nor specifies what interest rate now applies.26 This ambiguity surrounding the interest to accrue on student loans is problematic in itself as students remain unaware of the final sum to be repaid. For this same reason, the diversion of the UFTF cannot be viewed as a viable investment option. The lack of certainty on interest accruing on NELFUND cannot be said to serve the best interest of the beneficiaries of the fund.
Currently, there is no legal justification for the diversion of funds in the UFTF to NELFUND. The Fiscal Responsibility Act 2007 which regulates government borrowing provides for the existence of prior authorisation in an Act or Law for the purpose for which the borrowing is to be utilised.27 The special debt the UFTF is designed for only relates to crisis expenditure or other exigencies to which the NELFUND falls short. Neither does the UFTF fall under ‘means of financing NELFUND’ provided for by the Student Loans Act.28 Therefore, the diversion would offend the legal principle that private property should not be appropriated without clear justification and due process.
6. Implications of the Executive Policy
- Breach of Trust:
Where a trustee acts contrary to the duties imposed on him, or abuses the powers conferred by the terms of the trust, that trustee is in breach of trust. A failure to preserve trust assets by investing in unauthorised assets or not investing at all would also consist in breach of trust. Therefore, the executive directive to divest funds in the UFTF and UBTF into NELFUND with no certainty of recouping such investment, does not align with the purpose of the trust and could amount to a breach of trust. As stated earlier, NELFUND is not a crisis related expenditure or fund requiring urgent demand. Instead, it requires sustainable, long-term funding framework to meet students’ educational needs.
6.2 Reduced Investor Confidence:
Where there is perceived appropriation of dividends, investors would be unwilling to invest in full confidence on the security of their investment. In the event that the country experiences low liquidity around the same period as the influx of valid claims to the fund already advanced to NELFUND, this could affect the capacity of the DMO to honour those claims. Hence, returning the fund to the beneficiaries of the fund would depend on the government’s broader fiscal position at the time. This is the risk that ordinary sovereign debt instruments are meant to manage transparently through the bond and treasury bill markets, and not through funds nominally held on trust for private citizens. By diverting unclaimed dividends into NELFUND instead of resorting to already established legitimate borrowing mechanisms, the government effectively converts unsuspecting shareholders into involuntary creditors of the state, without providing for the disclosure, consent or protections that legitimate government borrowing would ordinarily require.
6.3 Fiscal Opportunism:
Pooling unclaimed dividends and funds from dormant bank accounts into trust funds and putting the DMO as the supervisory authority should not be aimed at giving public authority easy access to private assets. In recent years, Nigeria has seen a marginal decline in its foreign exchange rate which has affected its liquidity and is only now beginning to stabilise. The government should not be seen as crossing over from custodian to debtor so easily by directly using private funds for fiscal purposes without the legal justification to do so. Furthermore, the FGN runs the risk of setting a precedent where the practice of executive reallocation is normalised over trust funds or pooled private assets over which it has control to pursue government objectives. This could erode the predictability that dedicated fund structures are meant to provide.
7. Recommendations
Nigeria will not be the first to divert unclaimed dividends and dormant accounts to meet states’ fiscal needs. However, it requires a sense of legal propriety, transparency and accountability as well as prioritising reuniting the funds with its legal beneficiaries.
7.1 Statutory legitimacy:
The major challenge that the directive has is its lack of legitimate legal foundation which supports and regulates the diversion of unclaimed dividends and funds from dormant accounts to finance NELFUND. Therefore, it is clear that there is a need to amend the Finance Act 2020 to allow the UFTF fund the NELFUND. This approach will likely raise significant questions regarding its legal propriety, since this would be using privately owned assets to fund education without consent or compensation. The transfer of N100 billion naira to form part of the FGN’s securities marked the shift from custodianship to treating the fund as a source of public revenue. The subsequent proposal to utilise the UFTF as resource funding for NELFUND further accentuates this shift. The policy can still support education without weakening shareholder protection if the transfer is structured as a lawful investment or borrowing transaction rather than as an irreversible appropriation of private assets.
7.2 Transparency and Accountability:
It is essential that the utilisation of idle funds be viewed as a welcome development rather than fiscal opportunism by the State. It can only be encouraged by transparent and accountability frameworks which are executed strictly. Currently, the DMO which is the official debt management body for the FGN, is the supervisory authority in charge of the UFTF. It is proposed that an independent body be established instead, to bifurcate the custodian and debtor roles that the FGN occupies in this relationship. This would relieve the competing interest the FGN plays in this scenario and remove the fiduciary breach of trust. The primary focus as a custodian would be reunification of the funds with their beneficial owners leaving other federal agencies involved to ensure proper use of the funds. Information should be released publicly showing the breakdown of how the funds were allocated, how much was reclaimed and other relevant data.
7.3 Effective Recovery Procedure:
There is a need to develop a reliable, detailed and unified recovery procedure to reunite the funds with its beneficiaries. Unclaimed dividends and dormant accounts are currently being held under two separate trust funds despite the Finance Act 2020 unifying both funds under the UFTF. Beneficiaries should not be subjected to unnecessary procedural hurdles before accessing their funds where they have a valid and established claim over such funds. In 2026, technology is increasingly being deployed to facilitate the remote access of dividends by investors and to assist beneficiaries with tracing assets left by deceased family members. The efforts of the SEC to raise investor education to access unclaimed dividend remain significant. Nevertheless, all reasonable mechanisms for identifying and reuniting beneficiaries with their funds should be exhausted before any measure which may adversely affect the liquidity of the trust fund is contemplated.
8. Conclusion
The problem of unclaimed dividends is ultimately about balancing regulatory stewardship with the protection of proprietary rights. While idle funds raise legitimate management concerns, dividends remaining unclaimed does not extinguish an investor's underlying entitlement. Regulation should therefore focus not just on safeguarding these funds, but on ensuring effective avenues for their recovery. This requires shifting from a reactive model, where beneficiaries must initiate recovery themselves, to a proactive one with stronger interoperability of investor records, better tracing mechanisms, simplified claims procedures, and public education.
Reunification mechanisms should be exhausted before unclaimed dividends are subjected to arrangements such as NELFUND which could affect the liquidity of the trust fund. Ensuring availability of loans to destitute students should not sacrifice legality, proprietary rights and basic legal principles which the executive directive attempts. Ultimately, any framework governing unclaimed dividends should be judged not by its ability to preserve or invest idle funds, but by its capacity to keep those funds accessible to their rightful owners. Liquidity, investor rights, and public confidence should not be viewed as competing objectives, rather a framework designed to prioritize reuniting beneficiaries with their entitlements will better serve all three objectives.
Footnotes
1 Oreoluwa Adejumo, NYSC Associate, Corporate Finance and Capital Market Department, S.P.A. Ajibade & Co., Lagos State, Nigeria.
2 Joel Oladele, ‘NELFUND Faces Legal Hurdle Over Unclaimed, Dormant Funds’ The Guardian (25
August 2026) available at (https://guardian.ng/news/nelfund-faces-legal-hurdle-over-unclaimed-dormant-funds/) accessed 10 September 2026.
3 Chukwuma Umeorah, ‘SEC Seeks Recovery of N242bn Unclaimed Dividends with New Enforcement Push’ The Sun (16 June 2025) available at (https://thesun.ng/sec-seeks-recovery-of-n242bn-unclaimed-dividends-with-new-enforcement-push/) accessed 11 September 2026.
4 Tobi Tunji, ‘FG borrows N100 billion from “Unclaimed Funds Trust Fund Account” in 2025’ Nairametrics (19 April 2026) available at (https://nairametrics.com/2026/04/19/fg-borrows-n100-billion-from-unclaimed-funds-trust-account-in-2025/#google_vignette) accessed 11 September 2026.
5 Companies and Allied Matters Act 2020 (CAMA 2020).
6 CAMA 2020, s429.
7 CAMA 2020, s432.
8 Banks and Other Financial Institutions Act 2020 (BOFIA 2020).
9 BOFIA 2020, s72.
10 Central Bank of Nigeria, 'Guidelines on Management of Dormant Accounts, Unclaimed Balances, and Other Financial Assets in Banks and Other Financial Institutions in Nigeria' (19 July 2024) available at (https://www.cbn.gov.ng/Out/2024/FPRD/Circular_Guidelines%20on%20Mgt%20of%20dormant%2 0account%20and%20unclaimed%20funds-combined.pdf) accessed 9 September 2026.
11 Finance Act, 2020.
12 Finance Act 2020, ss76 & 77.
13 National Debt Management Framework 2023 – 2027.
14 Finance Act 2020, s60 amending CAMA 2020, s432.
15 Securities and Exchange Commission, 'Circular To Paying Companies, Capital Market Stakeholders and the General Public on The Treatment of Unclaimed Dividends Of Public Companies' (5 June 2025) available at (https://sec.gov.ng/for-investors/keep-track-of-circulars/circular-to-paying-companies-capital-market-stakeholders-and-the-general-public-on-the-treatment-of-unclaimed-dividends-of-public-companies/) accessed 13 September 2026. This directive only applies to shares that were not statute barred before the Finance Act came into effect by December 2020.
16 See, Olayide Adigun, Cases and Texts on Equity Trust and Administration of Estates (1st Edition, 1987) 246. See, Underhill’s Law of Trust and Trustees (13th Ed.) 1.
17 See, Low v. Bouvery (1891) 3 Ch. 82 at 99 per Lindley L.J.
18 Black’s Law Dictionary 4th Edition p.490. See, NIPOST v. Insight Engineering Co. Ltd. (2006) 18 NWLR (Pt. 983) 435.
19 Olasiyan T.T and Olasiyan A. F., ‘Government Borrowing from Unclaimed Dividends and Dormant Accounts in Nigeria: A Doctrinal and Comparative Analysis of Legality’ (6 May 2026) available at (https://ssrn.com/abstract=6838218) accessed 13 September 2026.
20 FW Maitland, Equity, (AH Chaytor and WJ Whittaker, eds.), Cambridge University Press, 1909 99 cited in LOC Chukwu, Trust Investment Law and Practice in Nigeria (University of Lagos Press, 2013).
21 Ibid.
22 G Watt, Law of Trusts, (3rd ed., London: Blackstone Press, 2001) 268.
23 Cowan v Scargill [1984] 2 All ER 750 at 761.
24 T22, Laws of the Federation of Nigeria 2004.
25 [2009] 9 NWLR (Pt. 1146) 400 SC; [2003] 8 N.W.L.R. (Pt. 821) 73 CA.
26 Student Loan Act 2024, Part III.
27 Fiscal Responsibility Act 2007 (FRA 2007), s44.
28 The Fund is resourced by one percent of all taxes, levies and duties collected by the Federal Inland Revenue Service.
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