The Nigerian banking landscape is set for a significant shakeup following the overwhelmingly approved merger between Providus Bank Limited and Unity Bank Plc. This landmark business combination, the first under the Central Bank of Nigeria’s (CBN) ongoing recapitalization mandate is poised to create a formidable national institution, marking a strategic shift toward fewer, better-capitalized, and more resilient banks.
A Confluence of Strengths
The merger, which received near-unanimous endorsement from shareholders of both institutions at court-ordered Extraordinary General Meetings (EGMs), is an integration of complementary strengths. Providus Bank, a relatively young institution known for its innovation and strong digital capabilities, is merging with Unity Bank, which brings a vast legacy branch network, particularly its deep-rooted presence across the Northern regions of the country.
The merged entity, set to operate under the name Providus-Unity Bank (PUB), will commence operations with an extensive physical footprint of approximately 230 branches nationwide, instantly positioning it among the top ten banks in terms of physical reach. This expanded network, coupled with the integrated digital platforms of both banks, is designed to enhance service delivery and significantly deepen financial inclusion across underserved areas.
The Regulatory Lifeline and Financial Structure
A critical component enabling this consolidation is the substantial N700 billion financial accommodation extended by the Central Bank of Nigeria. This intervention, structured as a 20-year tenured loan with a five-year principal moratorium and a floating interest rate (MPR minus 11%, with a minimum of 6%), is vital for the financial health of the post-merger institution.
The CBN’s funding is earmarked to address Unity Bank’s legacy obligations, including a substantial portion dedicated to clearing liabilities owed to other financial institutions and the CBN itself, such as debts from the Anchor Borrowers Programme.
A significant sum of the support will also be strategically invested in a 20-year Federal Government of Nigeria bond, which will qualify as Tier-2 capital. This will eliminate Unity Bank’s negative shareholders’ fund and significantly shore up the combined entity’s capital base, ensuring compliance with the evolving capital adequacy requirements.
Once the merger is complete, the entire share capital of Unity Bank will be canceled, and the bank will be dissolved without winding up. Providus Bank Limited will be the surviving entity, retaining its certificate of incorporation.
Shareholder Options and AMCON Stake
The Scheme of Merger provides clear options for Unity Bank shareholders:
- Cash Consideration: Receiving a payment of N3.18 for every share held.
- Share Swap: Being allotted 18 ordinary shares of N0.50 each in the enlarged Providus Bank Limited for every 17 ordinary shares of Unity Bank held.
A separate, yet related, development involved the divestment of the Asset Management Corporation of Nigeria’s (AMCON) 34% equity stake in Unity Bank.
Contrary to initial reports, Unity Bank clarified that this stake was sold to an existing shareholder of the bank not Providus Bank in a crossed deal on the Nigerian Exchange (NGX) shortly after the suspension on Unity Bank’s shares was lifted. This sale further signals investor confidence in the future prospects of the newly emerging bank.
Implications for the Nigerian Banking Sector
This merger is expected to intensify competition within the Nigerian banking sector, particularly against the larger Tier 1 banks. The enlarged Providus-Unity Bank gains immediate scale, a diversified customer base spanning corporate, commercial, and retail segments, and an increased capacity to support large-scale credit, especially within the agribusiness and Small and Medium Enterprise (SME) sectors where Unity Bank historically held a strong position.
Analysts view the strategic combination and the CBN’s proactive financial support as a significant moment of sector stabilization, safeguarding depositors’ interests, and providing a plausible path out of distress for Unity Bank.
It is a defining transaction that underscores the CBN’s determination to foster a more stable, resilient financial system capable of supporting Nigeria’s economic goals. The new institution is now expected to focus on disciplined execution and maximizing the synergies between Unity Bank’s expansive reach and Providus Bank’s innovative technology to deliver enhanced value to all stakeholders.
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