By 
The Central Bank of Nigeria (CBN) has approved the merger between Providus Bank and Unity Bank, marking a significant step in the consolidation of the banking sector. The next phase involves awaiting approval from the Securities and Exchange Commission (SEC).
This approval by the CBN is the first under its recent mandate requiring banks to increase their minimum capital bases. According to the CBN’s recapitalisation directive, international banks must raise their capital to N500 billion, national banks to N200 billion, and regional banks to N50 billion.
A letter dated July 22, 2024, signed by Adetona Adedeji, Acting Director of the Banking Supervision Department at the CBN, confirmed the approval. This communication, addressed to Unity Bank’s Managing Director, was in response to a previous request for merger approval and financial support dated June 19, 2024.
In its approval, the CBN granted a financial support package of N700 billion to the merged entity, structured as a 20-year term loan at a six percent interest rate, with a five-year repayment moratorium. The financial support is designed to assist the new entity in addressing existing obligations and investing in Federal Government of Nigeria (FGN) bonds to qualify as Tier 2 capital.
The letter outlined that Unity Bank’s current Cash Reserve Ratio (CRR) shortfall of N117.90 billion would be waived. The CRR balance of Providus Bank post-merger will serve as the opening balance for the new entity.
In a statement issued on Tuesday, Hakama Sidi, Acting Director of Corporate Communications at the CBN, emphasized that the approval aims to reinforce the stability of Nigeria’s financial system and mitigate systemic risks. He noted that the CBN’s action aligns with the provisions of Section 42 (2) of the CBN Act, 2007, and is crucial for the financial health and stability of the merged bank.
Sidi also reassured that no current Nigerian bank faces a situation comparable to that of Heritage Bank, which was recently liquidated. The CBN remains dedicated to protecting depositors and ensuring a stable banking environment through strategic interventions.
Both Providus Bank and Unity Bank have confirmed the CBN’s approval and are now awaiting SEC’s review. The merger, part of Providus Bank’s expansion strategy, is intended to strengthen its capital base amid the ongoing recapitalisation efforts.
In a joint statement, the banks described the merger as a strategic move to leverage their respective strengths. Unity Bank, with over 220 branches nationwide and a strong focus on agricultural banking, will combine its extensive retail network with Providus Bank’s digital innovation and high-quality service culture. The merged entity aims to offer an enhanced blend of traditional and digital banking services, improving customer convenience and access.
The banks are committed to upholding high standards of corporate governance, financial stability, and customer satisfaction throughout the merger process and beyond.
Comments