As per the CBN circular, the financial assistance is needed to fortify the stability of Nigeria’s financial system and avert certain systemic hazards.
Ten things about the merging of Unity Bank and Provident Bank are listed by BusinessDay:
Since the combination of Access Bank and Diamond Bank in 2019, this is the first merger in the Nigerian banking industry.
It also represents the second significant step toward banking consolidation since the CBN announced the recapitalisation program; the first was Heritage Bank’s license revocation.
With the addition of Providus Bank’s 23 branches and Unity Bank’s 220 branches, the combined banking organization will have 243 branches throughout Nigeria, placing it in the top ten largest banks in the country by branch network.
It is anticipated that the digital platforms of both banks would also be in sync. Providus Bank is the owner of ProvidusPlus, whereas Unity Bank is the owner of the mobile app Unifi by Unity Bank.
In August, the CBN authorized N700 billion in funding for the merger.
With a minimum interest rate of 6% and a 20-year duration, the loan has a floating interest rate equal to the MPR minus 11%. The loan is subject to a five-year moratorium. But while the principal repayment will take place over the next 15 years, interest payments will only be made every other year.
4. The loan will be used to pay off Unity Bank’s N303.7 billion obligations
It was alleged that Unity Bank’s liabilities, including its N92 billion debt to First Bank of Nigeria, will be settled with a sizable portion of the support—N303.7 billion.
Additionally, it would be used to pay off the bank’s N135 billion obligation to NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending) and its N51.7 billion liability to the CBN from the Anchor Borrower Scheme.
Tier-2 capital would be met by the firm with the remaining N392.3 billion deposited in a 20-year FGN bond.
It will also strengthen the shareholders’ fund of Unity Bank from N202.1 billion as opposed to N190.2 billion in September 2023. This will equal N247.36 billion with the N45.25 billion total shareholders’ fund of Providus Bank.
Born out of several of its predecessor banks, namely Bank of the North, Tropical Commercial Bank, Intercity Bank, and New Africa Bank, Unity Bank boasts one of the largest branch networks in Northern Nigeria.
In Nigeria’s financial system, Unity Bank was distinctive, especially in the northern areas, despite its troubled legacy. In many communities, the bank provided essential services to state and municipal governments that had limited access to financial services.
Under Yemi Cardoso’s leadership at the CBN, the Unity-Providus Bank merger is the first bank merger. In keeping with the CBN’s goal to preserve financial system stability, it is also the first bank rescue undertaken by the current governor of the central bank.
One of the CBN’s main objectives in a nation where 37% of rural Nigerians lack access to banking is financial inclusion, which is why the merger of the two banks is significant.
With total assets of N1.5 trillion as of December 2023, Providus Bank has demonstrated robust growth and sound financial management. The bank has grown its assets by 189 percent in three years from N543 billion in 2021.
Combined with Unity Bank’s total assets of N423 billion, according to its unaudited accounts for the period ending September 2023, the new bank’s total assets will amount to about N2.43 trillion.
