Nigeria: Unity Bank Seeks ₦700 Billion CBN Support for Providus Merger

In a bid to stabilize Nigeria’s financial system, the Central Bank of Nigeria (CBN) has extended a significant financial facility to support the merger between Providus Bank and Unity Bank. Unity Bank, which reported losses of ₦38.8 billion in the first half of 2023, has been at the center of this support initiative.

Although the CBN has not officially disclosed the exact amount of the facility, sources familiar with the matter have informed TechCabal that the support totals ₦700 billion. This financial assistance aims to bolster the merger and ensure a smooth transition.

A letter from Unity Bank’s managing director to the CBN, dated July 22, 2024, outlines the bank’s request for “merger approval and financial support.” The letter specifies a loan request at an interest rate of “MPR minus 11%, subject to a minimum of 6%.” The repayment is scheduled to commence in the sixth year, with the new entity making payments in 15 equal installments until maturity.

Unity Bank has declined to comment on the matter.

“The merger is contingent upon receiving financial support from the CBN,” said Hakama Sidi, Acting Director of Corporate Communications at the CBN. “This funding is critical for addressing Unity Bank’s obligations to the Central Bank and other stakeholders, in line with Section 42 (2) of the CBN Act, 2007.”

Hakama emphasized the importance of this support for maintaining the financial health and operational stability of the merged entity. Unlike its more profitable peers, such as Guaranty Trust Holding Company (GTCO) and Stanbic IBTC, Unity Bank has struggled with poor financial results and high foreign currency exposure.

Unity Bank’s CEO, Mrs. Tomi Somefun, attributed the bank’s financial difficulties to adverse operating conditions affecting its growth. “The market-driven impact we’re experiencing is expected to improve with positive outcomes from government policies in the near term,” Somefun stated in a statement shared with TechCabal in September 2023.

Unity Bank has faced scrutiny since KPMG highlighted concerns over its 2022 financial statements. The bank’s liabilities exceeded its assets by ₦274.9 billion in 2022, with KPMG noting this as a “growing concern.” Despite reporting a ₦1.04 billion profit in Q1 2023, the bank’s liabilities continued to outstrip its assets.

As of now, Unity Bank has yet to release its full-year financial reports for 2023, leaving questions about its financial health unanswered. In September 2023, Somefun indicated that the bank planned to complete a recapitalization exercise well ahead of the CBN’s mandated deadlines, focusing on retail growth prior to the merger.