(Bloomberg) -- The Central Bank of Nigeria approved its first bank merger since increasing capital requirements four months ago and ordering lenders to consider equity offers and business consolidation to comply.
The Abuja-based regulator sanctioned a tie-up between Providus Bank Ltd. and Unity Bank Plc. It said the merger was “contingent upon the financial support from the CBN,” according to a statement posted on the central bank’s website on Tuesday.
It didn’t provide details of the assistance, but said the “fund will be instrumental in addressing Unity Bank’s total obligations to the central bank and other stakeholders.”
Nigeria’s banks are striving to meet the new thresholds after the CBN lifted capital requirements tenfold in March. That move was a precautionary response to economic weakness that could risk loan books, and a steep fall in the naira after currency reforms last year which has hit a number of their clients.
The central bank also stressed that the nation’s lenders were healthy and depositors would be protected.
“No Nigerian bank currently faces a precarious situation,” it said. “The CBN remains committed to safeguarding depositors’ interests and ensuring the smooth functioning of the banking sector through proactive measures and strategic interventions.”
Five lenders including Guaranty Trust Holding Co., the biggest lender, and Zenith Bank Plc are currently raising capital to meet the requirement. Nigerian banks have until 2026 to comply with the directive.
Unity and Providus are commercial lenders with in-country operations. Banks in that category are required to shore up capital to 200 billion naira ($125 million) from 25 billion naira.
Analysts at Afrinvest in Lagos estimate that Providus requires 18 billion naira in fresh capital to meet the threshold, while Unity Bank needs about 184 billion naira.
Moody’s Ratings previously predicted mergers for small lenders in the face of competition with big banks for funds.
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