CBN Approves Merger Between Unity Bank, Providus Bank

The Central Bank of Nigeria (CBN) has officially approved the merger between Unity Bank Plc and Providus Bank Limited.

This landmark decision marks the first merger under the new CBN mandate for banks to bolster their capital bases, aiming to fortify the stability of Nigeria’s financial system.

The merger is now pending approval from the Securities and Exchange Commission (SEC).

The CBN’s recent recapitalisation directive requires commercial banks with international, national, and regional authorisations to increase their capital bases to N500 billion, N200 billion, and N50 billion respectively.

The Unity-Providus merger is a strategic response to this directive, positioning the new entity to meet the stringent capital requirements and leverage the combined strengths of both banks.

A significant aspect of the merger is the financial backing from the CBN, amounting to N700 billion. This support is structured as a 20-year term loan with a favourable interest rate of six percent, with repayments commencing after a five-year moratorium.

This substantial financial accommodation highlights the CBN’s commitment to stabilising the banking sector and preventing systemic risks, reminiscent of the recent challenges faced by Heritage Bank.

The CBN’s approval also includes measures to address Unity Bank’s existing obligations totalling N303.7 billion, including exposures to First Bank of Nigeria, financial accommodations from the CBN, and obligations under the Anchor Borrowers Programme and NIRSAL. The remaining N396.3 billion will be invested in a 20-year Federal Government of Nigeria bond, qualifying as Tier 2 capital and bolstering the new entity’s shareholders’ fund.

The merger aligns with Providus Bank’s expansion strategy and Unity Bank’s need to enhance its capital base amidst recapitalisation challenges. Providus Bank, known for its innovative digital banking solutions, will bring technological prowess and a modern approach to the merger. Unity Bank, with its extensive retail banking network and strong presence in the agricultural sector, will complement Providus’s strengths, creating a formidable entity in the Nigerian banking industry.

Market Impact

The merger is set to transform the landscape of Nigeria’s banking sector by creating a financial institution with comprehensive retail, corporate, commercial, and digital banking services. Customers of both banks can anticipate an enriched suite of products, improved convenience, and enhanced access to banking solutions. The integration of digital platforms promises better security, faster transactions, and a more personalised banking experience.

Future Outlook

The successful integration of Unity and Providus will depend on the seamless blending of their respective cultures, technologies, and operational systems. The commitment to high standards of corporate governance, financial stability, and customer satisfaction will be crucial in navigating the transition and maintaining trust among stakeholders.

The Unity-Providus merger represents a significant milestone in Nigeria’s banking sector, driven by regulatory changes and the imperative to strengthen financial stability. As the merger awaits SEC approval, the banking industry and its customers can look forward to the emergence of a robust, innovative, and customer-centric financial institution.