NNPCL Dividends Policy PDF

NNPC Limited Finance and Accounts Process and Procedures 12.0 Dividends Policy 12.1 Objectives This policy provides guidance on the distribution of Dividends to NNPC Limited equity Shareholders, while maintaining a balance between Dividend pay-out and retained profits. It is designed to ensure the...

NNPC Limited Finance and Accounts Process and Procedures 12.0 Dividends Policy 12.1 Objectives This policy provides guidance on the distribution of Dividends to NNPC Limited equity Shareholders, while maintaining a balance between Dividend pay-out and retained profits. It is designed to ensure the following:  That NNPC Limited and its wholly owned Subsidiaries have sufficient distributable profits prior to declaration of dividends.  There is a defined structure for the calculation, declaration, and settlement of Dividends.  NNPC Limited strikes the right balance between the amount paid out as dividends and profits retained to grow its business pursuant to Section 53(7) of the Petroleum Industry Act (PIA). 12.2 Scope/Applicability This Policy covers the following:  Declaration of Dividends  Eligibility for Dividends  Payment of Dividends  Taxation of Dividends  Performance Management This policy applies to NNPC Limited, its wholly owned Subsidiaries and all employees. 12.3 Dividend Policy Statement  Pursuant to Section 53(7) of the Petroleum Industry Act (PIA), NNPC Limited shall declare dividends to its Shareholders and retain 20% of profits as retained earnings to grow its business. 109 NNPC Limited Finance and Accounts Process and Procedures  Accordingly, NNPC Limited shall declare an amount not exceeding 80% of distributable profits, per unaudited Quarterly Management Accounts or audited Annual Financial Statements, to the Shareholders as dividends. Dividend declaration shall therefore be done on a quarterly and annual basis.  All Subsidiaries of NNPC Limited to declare dividends out of distributable profits, per unaudited Quarterly Management Accounts and audited Annual Financial Statements, to NNPC Limited. Dividend declaration shall be done on a quarterly basis, with a final dividend declaration closely following approval of the Annual Financial Statements.  NNPC Limited and its Subsidiaries shall not declare dividends out of its respective capital in line with section 433 (1) of CAMA 2020.  NNPC Limited currently operates only one class of shares - ordinary equity shares. This class of shares shall be entitled to dividends as recommended by the Board of Directors and approved by the Shareholders. 12.4 Procedural Guidelines 12.4.1 Declaration of Dividends by NNPC Limited The following guidelines shall apply for dividend declaration by the NNPC Limited:  Based on the unaudited Financial Statements and on the strength of the projected cash flow position of the Company; Management shall, if deemed fit, propose to the Board of Directors, the declaration of Interim Dividends to the Shareholders on a quarterly basis.  Any declaration of dividends shall contain the following:  The class of share on which dividend is declared  The amount of dividend per share 110 NNPC Limited Finance and Accounts Process and Procedures  The period for payment  The form of payment  Based on the audited Annual Financial Statements, Management shall propose to the Board of Directors, declaration of final dividends to the Shareholders from the distributable profits of the Company for that financial year, provided that total quarterly dividends declared for that financial year is less than 80% of distributable profits per the audited Annual Financial Statements. Such final dividend shall be the amount required to make total dividend declaration for the financial year no more than 80% of distributable profit per the audited Annual Financial Statements.  Proposal to declare Interim dividends shall be considered and approved at the Shareholders Extraordinary General Meeting (EGM), while proposals to declare final dividends shall be considered and approved at the Annual General Meeting of the Shareholders.  Where no final dividend is declared due to the 80% cap on distributable profits, the Interim Dividends declared shall be recognized as Final Dividend declaration at the Annual General Meeting (AGM).  All Dividend proposals by NNPC Limited must be supported by the Chief Financial Officer (CFO) and endorsed by the Chief Executive Officer (CEO) for presentation to the Board of Directors of the Subsidiary for review and recommendation to the Shareholders for approval at the Extraordinary General Meeting (EGM) or Annual General Meeting (AGM) as the case may be. 12.4.2 Declaration of Dividends by Wholly Owned Subsidiaries of NNPC Limited The following guidelines shall apply for dividend declaration by wholly owned Subsidiaries of NNPC Limited: 111 NNPC Limited Finance and Accounts Process and Procedures  Based on unaudited financial statements and on the strength of the projected cash flow position of a wholly owned Subsidiary; Management shall, if deemed fit, propose to the Board of Directors, declaration of Interim dividends to the Shareholders on a quarterly basis.  Any declaration of dividends shall contain the following:  The class of share on which dividend is declared  The amount of dividend per share  The period for payment  The form of payment  Based on audited Annual Financial Statements and on the strength of the projected cash flow position of a wholly owned Subsidiary; Management shall, if deemed fit, propose to the Board of Directors, declaration of Final dividends to the Shareholders from the distributable profits.  On the strength of Section 7 of the Finance Act 2020, wholly owned Subsidiaries shall have the option of declaring dividends out of their retained earnings, where the dividends had previously been subjected to income tax, profit tax or capital gains tax. Therefore, dividend declaration by wholly owned Subsidiaries shall not be restricted to the distributable profits of the current financial year only.  Dividend proposal by a wholly owned Subsidiary of NNPC Limited shall be supported by the Head of Finance & Accounts of the Subsidiary and endorsed by the Managing Director of the Subsidiary for presentation to the Board of Directors of the Subsidiary for review and recommendation to the Shareholders for approval at the Extraordinary General Meeting (EGM) or Annual General Meeting (AGM) as the case may be. 112 NNPC Limited Finance and Accounts Process and Procedures 12.4.3 Other Considerations for Dividend Declaration Subject to the provisions of Section 53(7) of the Petroleum Industry Act (PIA), distribution of profits by NNPC Limited to its Shareholders shall also be guided by the following principles:  The recognition of profits and available cash flows for distribution;  Any banking or other funding requirements by which NNPC Limited is bound from time to time;  The operating and investment requirements of NNPC Limited;  The anticipated long-term growth strategy of NNPC Limited;  Emerging trends in dividend payouts in the industry; and  Optimal Shareholders return;  Applicable laws. NNPC Limited or its wholly owned Subsidiary shall not declare any dividends where:  There are no distributable profits in any financial year, which had previously been subjected to income tax, profit tax or capital gains tax, on which dividend has not been previously declared.  Such declaration will violate the provisions of the law, as contained in the Companies and Allied Matters Act, 2020, the Finance Act 2020 or any extant law. 12.4.4 Eligibility for Dividend Distribution Dividends shall be distributed to the Shareholders listed in the share register of NNPC Limited and wholly owned Subsidiaries as at the close of the financial period to which the distributable profit relates. 12.4.5 Payment of Dividends Dividend payments shall be made in line with a resolution of the Board of Directors and Shareholders as required by constituted governance documents. NNPC Limited and its wholly owned subsidiaries shall pay dividend as 113 NNPC Limited Finance and Accounts Process and Procedures soon as practicable, following the date the dividend is declared at its EGM or AGM. Dividends shall be paid to the shareholders of NNPC Limited in Nigerian Naira. For any other matters relating to the payment of dividends which is not covered by the Law, the Company’s Articles of Association and policies shall be employed in a manner which takes into consideration and complies with the rights and legitimate interests of shareholders. 12.4.6 Taxation of Dividend Dividends shall be paid to the Shareholders net of withholding tax (WHT) at the prevailing rate. Withholding tax deducted from dividends paid by NNPC Limited and its wholly owned Subsidiaries shall be remitted in accordance with the provisions of the relevant tax legislation (refer to the Tax Management Policy for details). 12.4.7 Performance Management The Treasurer of NNPC Limited and all the Heads of Finance & Accounts of wholly owned Subsidiaries shall ensure the correct and timely recognition of all dividend declarations and payments in the books of the paying and receiving entities. A quarterly report on dividend payments by NNPC Limited and its wholly owned Subsidiaries, shall be prepared by the Treasurer of NNPC Limited in collaboration with the Heads of Finance of Subsidiaries, for presentation to the Executive Management. 12.5 Compliance The Governance, Risk and Compliance (GRC) team shall perform a biennial review of the execution of this Policy for compliance and report any infringement to the Board of Directors. Where the need arises, the GCEO is authorized to grant exceptions to the application of this policy, and thereafter seek ratification from the NNPC Limited Board. 12.6 Disclosure Requirements 114 NNPC Limited Finance and Accounts Process and Procedures Dividends declared and paid shall be accounted for in line with the provisions of IFRS. In line with IAS1, NNPC Limited and its Subsidiaries shall disclose in its financial statements the following:  Dividends or distributions paid during the year; and  Dividends or distributions recommended or declared for payment, but not paid, during the year. (Refer to the Accounting Policy for detailed disclosure requirements) 12.7 References This Policy shall be read together with the provisions of Section 53(7) of the Petroleum Industry Act (PIA), relevant provisions of the Companies and Allied Matters Act 2020 and Finance Act 2020, and the FX Management Policy. 115