In order to stabilize Nigeria’s financial system, the Central Bank of Nigeria (CBN) has extended substantial support to facilitate the merger between Providus Bank and Unity Bank, the latter of which recorded losses of ₦38.8 billion in the first half of 2023.
While the CBN has not officially disclosed the exact amount of support, sources reveal it amounts to ₦700 billion.
Unity Bank requested the CBN’s assistance through a letter dated July 22, seeking merger approval and financial aid.
The bank proposed a loan with an interest rate of MPR minus 11%, with a minimum of 6%, to be repaid in 15 equal installments starting in the sixth year.
Hakama Sidi, acting director of corporate communications at the CBN, affirmed that the merger’s success hinges on this financial support.
He highlighted that the CBN’s involvement aligns with Section 42 (2) of the CBN Act, 2007, and is crucial for addressing Unity Bank’s financial obligations.
Unity Bank, in contrast to more profitable institutions like Guaranty Trust Holding Company (GTCO) and Stanbic IBTC, has struggled financially due to high foreign currency exposure.
CEO Mrs. Tomi Somefun attributed the bank’s poor performance to challenging market conditions, although she remains optimistic about improvements due to favorable government policies.
Analysts, including KPMG, have raised concerns about Unity Bank’s financial health, noting that its total liabilities exceeded its assets by ₦274.9 billion in 2022.
Despite a profit of ₦1.04 billion in Q1 2023, the bank’s liabilities continued to surpass its assets.
The bank has yet to release its full-year 2023 reports, which are awaited for greater transparency.
In September 2023, Somefun mentioned plans for recapitalization and a focus on retail growth prior to the merger, aligning with CBN’s directives to strengthen financial institutions.
