Negotiations over the proposed Providus-Unity Bank merger have stalled amid a bitter dispute over insider loans allegedly owed by directors of Unity Bank.
A senior management source at Unity Bank said the insider credits are “not less than N4.8 billion”, though the exact figure remains unclear. The directors are reportedly pushing for the debts to be written off ahead of the merger with Providus Bank.
Providus’ board and management have strongly opposed any write-off, insisting that all obligations must be settled before the deal proceeds. Sources say regulatory compliance concerns are at the heart of the resistance, particularly with just six weeks left before the recapitalisation deadline set by the Central Bank of Nigeria.
If successful, the combined entity to be known as Providus-Unity Bank would become the ninth largest lender in Nigeria by assets, with N5.3 trillion in assets and N3.2 trillion in deposits. Providus would also transition from a regional operator to a national bank.
Both institutions have approached a Federal High Court seeking approval to convene extraordinary general meetings where shareholders would vote on the merger scheme.
The proposed merger would create a lender with 229 branches and 3.6 million customers. However, analysts are urging caution.
Patrick Osadebe, an industry analyst, warned that the apex bank has historically imposed stiff sanctions on boards found guilty of insider abuse, suggesting Providus’ caution is justified.
Unity Bank emerged in 2006 from the consolidation of nine banks, including Intercity Bank, First Interstate Bank and Bank of the North, during Nigeria’s banking sector reforms.
With the recapitalisation deadline looming, the insider debt impasse now threatens to derail what would be one of the most significant banking mergers in recent years.
