CBN-backed Unity Bank takeover safeguarded Northern Nigeria’s financial lifeline

The Central Bank of Nigeria (CBN)’s decision to back the takeover of Unity Bank by Providus Bank was driven primarily by concerns over the potential impact of the bank’s collapse on the northern region of Nigeria, new information has revealed.

Sources familiar with the matter disclosed this to THISDAY, stating that the apex bank deems Unity Bank too crucial to fail, given its role as the primary financial institution for numerous states and local governments in the North.

It was also mentioned that the bank’s primary customer demographic includes a significant number of farmers. The CBN recognised this and its importance to the region’s economic stability and food security.

While the total amount of depositors’ funds was not the primary concern, the CBN recognised that a sudden closure of Unity Bank would leave countless people in the North without access to banking services, potentially leading to a financial crisis.

Providus Bank emerged as the white knight, securing an 80 percent stake in the acquisition deal, facilitated by a substantial N700 billion loan from the CBN, which will also be used to recoup the apex bank’s previous support to Unity Bank.

“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,” the CBN had said.

The merger came as a surprise to the Nigerian banking industry, with many questioning Providus Bank’s ability to successfully integrate Unity Bank into its operations, considering its recent entry into the industry.