The Central Bank of Nigeria (CBN) has granted approval for a financial accommodation to support the proposed merger between Unity Bank Plc (NGX: UNITYBK) and Providus Bank Limited.
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In a press release on Tuesday, the Apex bank stated that the accommodation is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.
NASDAQ defines Financial Accommodation as a form of loan in which the borrower is not obligated to compensate the lender. These loans are often accompanied by accommodation bills, which guarantee that a third party compensates the lender, should the borrower be unable.
Media reports in 2023 and April 2024 stated that Providus bank was in talks to acquire Unity Bank Plc, a bank listed on the Nigerian Exchange. The acquisition was part of Providus Bank’s expansion plan.
Considering the initial talks of an acquisition, it is possible that Providus Bank will be the more dominant of a merger between both banks.
The merger between the two banks 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.
While Unity Bank’s financial buoyancy might be in question, it has the 10th most branches among Nigerian commercial banks. However the bank on its website says that it is Nigeria’s 8th largest bank by business locations, with 213 business offices spread across the 36 states and Federal Capital Territory.
Unity Bank commenced operations in January 2006 following the merger of nine Banks with competences in investment, corporate and retail banking.
The Bank offers wide-ranging financial services to individuals, businesses and the public sector of the nation’s economy. As a further commitment to the growth of the nation’s economy, Unity Bank focuses in particular on SMEs and Agribusinesses.
Providus Bank Limited was founded in 2016, is licensed by the Central Bank of Nigeria as a commercial bank.
As at 31 December, 2022, Unity Bank Plc had total assets worth N510.14 billion, funded by N785.09 billion liabilities and a negative Shareholder’s equity of minus N274.94 billion.
Providus Bank Limited’s total assets stood at N735.80 billion as at 31 December, 2022, funded by N690.54 billion liabilities and N45.26 billion Shareholder’s equity.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur