The Central Bank of Nigeria (CBN) has announced that it will provide a facility to support the merger between Unity and Providus Bank. Although the bank recorded losses of ₦38.8 billion in the first half of 2023, the CBN attributes the support as a means to ensure the stability of the Nigerian financial system.
The CBN has yet to disclose the amount of support it will officially provide for the merger of both banks. However, sources pin the figure at ₦700 billion.
Unity Bank’s Managing Director has sent a letter to the CBN requesting “merger approval and financial support” from the governing bank. According to the letter, the bank is requesting a loan at an interest rate of MPR minus 11%, subject to a minimum of 6%. After six years, the new financial entity will resume repayment through 15 equal installments until the loan’s maturity.
The merger is contingent upon the financial support from the CBN.
Hakama Sidi, Acting Director Corporate Communications of the CBN
The fund will be crucial in settling Unity Bank’s debts to the Central Bank and other creditors. The CBN’s action is authorized under Section 42(2) of the CBN Act, 2007.
Hakama stressed the importance of the arrangement for maintaining the financial health and operational stability of the post-merger organization. Unlike its profitable counterparts in the financial sector, such as the Guaranty Trust Holding Company (GTCO) and Stanbic IBTC, Unity Bank has consistently reported poor results, worsened by significant exposure to foreign currency.
We expect the anticipated outcomes of government policies soon to positively adjust the market-driven impact we are experiencing.
Mrs. Tomi Somefun, CEO of Unity Bank Plc
Somefun attributed the bank’s poor financial performance to the challenging operating environment, which hindered the bank’s growth.
Unity Bank has been in a concerning situation since analysts from KPMG raised questions about its full-year report ending December 31, 2022.
The bank’s total liabilities exceeded its total assets by ₦274.9 billion in 2022, prompting KPMG to note this situation in its records as a “growing concern.” Questions about the bank’s financial health persisted even after it posted a profit of ₦1.04 billion in the first quarter of 2023, as its total liabilities continued to exceed its total assets during the same period.
The bank has not yet released its full-year reports for 2023, which are crucial for full transparency.
In September 2023, Somefun hinted that the bank was planning to complete a recapitalization exercise well before the Central Bank of Nigeria (CBN) mandated banks to strengthen their positions. The bank indicated that it was focusing on retail growth before its merger.