CBN Shares Reason for Unity Bank, Providus Merger as Banks Make Promises
- The Central Bank of Nigeria (CBN) has said that it approved the merger of Unity and Providus banks to avert potential risks
- The bank said it also provided about N700 billion lifeline to Unity Bank to solidify the merger
- CBN stated that no Nigerian bank is under financial strain to the level of the recently liquidated Heritage Bank
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.
The Central Bank of Nigeria (CBN) has disclosed that it approved the merger of Unity and Providus banks to avoid systemic risks and boost the country’s financial system.
The financial institution’s regulator disclosed this in a statement signed by its Acting Director of Corporate Communications, Hakama Sidi Ali, on Tuesday, August 6, 2024.
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CBN offers a lifeline to actualize the merger
According to the statement, the apex bank approved a financial package to support the proposed merger between the two financial institutions.
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It said the strategic move is designed to enhance the stability of Nigeria’s financial system and avert potential risks.
CBN said:
“The merger is contingent upon the financial support from the CBN. The fund will be instrumental in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders.
“It is unequivocal to state that the CBN’s action is under the provisions of Section 42 (2) of the CBN Act, 2007.
“This arrangement is crucial for the financial health and operational stability of the post-merger organization.”
No Nigerian bank is under stress
It said that no Nigerian bank is under stress comparable to the recently liquidated Heritage Bank.
According to reports, the bank said it is committed to safeguarding depositors’ funds and interests and ensuring the smooth functioning of the banking industry through proactive measures and strategic interventions.
Meanwhile, the management of Unity and Providers banks lauded the CBN for approving the merger.
The banks said in a joint statement on Tuesday, August 6, 2024, that the merger represents a strategic and complementary union that will exploit the strengths of both banks to create a leading financial institution in the industry spanning retail, corporate, commercial, and digital banking.
Experts predict more mergers
Experts believe that recent recapitalization directives of the CBN are the reason for the banks' merger as more banks begin to shop for funds to meet the requirement.
Janet Ugboma, a senior banker and financial analyst, said the CBN directive is putting enormous pressure on financial institutions as the deadline is just less than 24 months away.
"We predict more mergers and outright acquisitions because the banks are seriously shopping for funds to meet the new capital base set by the CBN.
"For the banks that cannot meet the requirements, they will seek to merge or be acquired by more robust and financially stable banks," she said.
CBN approves merger of two Nigerian banks
Legit.ng earlier reported that the Central Bank of Nigeria (CBN) had approved the merger of Providus Bank and Unity Bank.
This was disclosed in a statement signed by the apex bank's acting director of corporate communications, Hakama Sidi, on Tuesday, August 6, 2024.
The CBN said its action is following the provisions of Section 42 (2) of the CBN Act, 2007.
Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng
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Source: Legit.ng
