In a move that has caused a stir in Nigeria’s financial industry, the Central Bank of Nigeria (CBN) has approved financial accommodation to facilitate the proposed merger between Unity Bank Plc and Providus Bank Limited.
The announcement, delivered by Mrs. Hakama Sidi Ali, the Acting Director of Corporate Communications at the CBN, is said to be part of efforts to stabilize the nation’s banking sector and avert potential systemic risks.
“The Central Bank of Nigeria (CBN) has granted approval for a pivotal financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited. This strategic move is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks,” the statement said.
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While the apex bank refrained from disclosing the exact figure of the financial aid, insider sources have revealed that the CBN injected approximately N700 billion into the merger. This colossal financial backing is poised to play a critical role in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders, ensuring the operational stability of the newly merged entity.
While the development has caused a stir, many believe that the funding by the CBN is vital for the financial health and operational stability of the post-merger organization. They note that the fund will be instrumental in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders.
The central bank’s action is grounded in Section 42 (2) of the CBN Act, 2007, which empowers it to take necessary measures to ensure the stability of the financial system.
“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. This arrangement is crucial for the financial health and operational stability of the post-merger organization,” the statement said.
The CBN emphasized that the arrangement is vital for the financial health and operational stability of the post-merger organization.
“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,” the CBN noted.
To assuage concerns, the CBN clarified that no other Nigerian bank currently faces a situation akin to that of Heritage Bank, which was recently liquidated. The central bank reassured stakeholders of its unwavering commitment to protecting depositors’ interests and ensuring the seamless operation of the banking sector through proactive measures and strategic interventions.
The move comes on the heels of the CBN’s recent revocation of Heritage Bank Plc’s banking license. This drastic step was taken in response to the bank’s persistent financial instability and failure to comply with regulatory requirements, as stipulated under Section 12 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
The CBN said that despite numerous supervisory measures, Heritage Bank’s financial health continued to deteriorate, posing a significant threat to the stability of Nigeria’s financial system. Consequently, the CBN acted decisively to revoke its license, reinforcing public confidence in the banking sector.
“The decision to revoke Heritage Bank’s licence is part of the CBN’s mandate to maintain a sound financial system in Nigeria,” the CBN stated emphatically. “Heritage Bank had failed to adhere to Section 12 (1) of BOFIA 2020, necessitating regulatory intervention. The bank’s continuous underperformance posed a significant threat to financial stability, compelling the CBN to revoke its licence.”
The CBN went to the cemetery and brought back a corpse and resuscitated it. It told you that the corpse was actually breathing, but in order not to lose it, an uncommon CPR was performed and it survived. Your CBN is now a miracle worker. Amazing, isn’t it?
Why Unity Bank and why the choice of Providus Bank for a merger? Was it really an obligatory move or simply because some corpses were not meant to be buried, instead you find a way and pump life back into it? Who benefited from this heist – depositors, shareholders or some boys? After this miracle, will the bank still go out to raise money for recapitalization or it has been recapitalized?
Again, where did the almighty CBN get N700 billion from, its profits, it borrowed or it created it from thin air? Each of them has different implications, the latter would lead to another round of inflation. If it borrowed it and gave it away for almost nothing, then it’s still like creating money from thin air. If it’s profits, then what is the balance?
The NNPCL guy said yesterday that they serve Nigeria honestly and they are patriotic, and the CBN seems to be serving Nigeria honestly and they are patriotic too. Ladies and gentlemen, honesty and patriotism have a new meaning in Nigeria.