By Cheta Enyoghsi
The Central Bank of Nigeria’s (CBN) decision to support Providus Bank’s takeover of Unity Bank is said to have been principally motivated by concerns about the potential impact of the bank’s collapse on Nigeria’s northern area.
According to sources acquainted with the situation, the apex bank believes Unity Bank is too important to fail, considering its role as the major financial institution for many states and local governments in the north.
It was also said that the bank’s key customer demographic comprises a large number of farmers. The CBN acknowledged this and its significance to the region’s economic stability and food security.
While the actual amount of depositor’s moneys was not the primary worry, the CBN recognized that Unity Bank’s unexpected closure would leave many people in the North without access to banking services, potentially leading to a financial crisis.
Providus Bank emerged as the savior, acquiring an 80% interest in the deal, which was aided by a significant N700 billion loan from the CBN, which will also be used to recover the apex bank’s previous support for 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 surprised the Nigerian banking industry, with many questioning Providus Bank’s capacity to successfully integrate Unity Bank into its operations given the latter’s recent arrival into the business.
