To ensure the stability of Nigeria’s financial system, the Central Bank of Nigeria (CBN) has provided a facility to support the merger between Providus and Unity Bank, a bank that recorded losses of  ₦38.8 billion during the first half of 2023.

While the CBN has not disclosed how much it provided in support, a source close to the situation told TechCabal that the amount was ₦700 billion.

According to a letter from Unity Bank’s managing director to the CBN seen by TechCabal, on July 22, the bank requested “merger approval and financial” support.

In that letter, it asked for a loan “priced at an interest rate of MPR minus 11%, subject to a minimum of 6%. Beginning in the sixth year, the new financial entity will recommence repayment in 15 equal installments until maturity.”

A spokesperson for Unity Bank declined to comment.

“The merger is contingent upon the financial support from the CBN,” said Hakama Sidi, the acting director corporate communications of 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 in accordance with the provisions of Section 42 (2) of the CBN Act, 2007.”

Hakama emphasized that the arrangement was crucial for the financial health and operational stability of the post-merger organisation. Unlike its profitable peers in the financial industry like Guaranty Trust Holding Company (GTCO), and Stanbic IBTC, Unity Bank has consistently reported poor results, further exacerbated by  high foreign currency exposure.

CEO of Unity Bank Plc, Mrs. Tomi Somefun, blamed the bank’s poor financial position on the operating environment, which impacted the bank’s growth. “What we have is a market-driven impact which is adjustable envisaged from the positive economic outcomes of the government policies in the near term,” Somefun said in a statement the bank shared with TechCabal in September 2023.

Unity Bank has been in a worrisome situation since analysts from KPMG queried its full-year report ended December 31, 2022.

The lender’s  total liabilities exceeded its total assets by ₦274.9 billion in 2022, and KPMG wrote a note regarding this situation in its books, highlighting it as a “growing concern.”  Questions have been raised on the bank’s financial health even after it managed to  record ₦1.04 billion profit in the first quarter of 2023. In that same quarter, its total liabilities continued to surpass its total assets in Q1 2023. 

Till date, the bank is yet to release its 2023 full year reports for full transparency.

In September 2023, Somefun hinted at the bank plans to complete a recapitalization exercise long before CBN manadated banks to shore up their positions. The bank said it was focusing on retail growth before its merger. 

*This is a developing story

*This story has been edited to show that Unity bank requested a loan facility from the Central Bank