by NIyi Jacobs
The much-anticipated merger between Unity Bank Plc and Providus Bank Limited, recently approved by capital market regulators and backed by the Central Bank of Nigeria (CBN), is drawing scrutiny over the financial assumptions underpinning the deal.
While the combination has been hailed as a lifeline for Unity Bank and a boost to overall market stability, analysts warn that questionable accounting treatments and unconventional regulatory interventions may set a troubling precedent for Nigeria’s financial system.
BusinessNG’s Economic and Market Intelligence Unit (EMIU), which has closely followed the transaction, argues that beneath the headline approvals lie yellow flags that raise concerns about transparency, regulatory discretion, and the interpretation of international financial reporting standards.
The first area of concern is the handling of a ₦540bn financial accommodation provided by the CBN to support the merger. Initially structured as a 20-year term loan with bond-like features, the facility has now been reclassified as Tier 1 capital — the highest quality of bank capital under international standards.
Tier 1 capital is supposed to be permanent and capable of absorbing losses immediately. Yet, in this case, the instrument remains a debt that must eventually be repaid, contradicting the permanence requirement. By counting this debt as core equity, critics argue, regulators risk undermining the integrity of bank capital definitions.
The concern is not only about Unity-Providus but also about what this reclassification signals for future mergers and the credibility of Nigeria’s adherence to Basel banking standards.
The second red flag surrounds the valuation of Unity Bank’s assets, particularly Plant, Property and Equipment (PPE). In the merger scheme, Unity Bank’s PPE was revalued from ₦24bn at year-end 2023 to over ₦690bn — a staggering 2,800 percent increase. While the acquiring institution engaged professional valuers who likely applied fair value methodology, the leap is so extraordinary that it raises questions about whether the accounting frameworks of IFRS 3 on Business Combinations and IFRS 10 on Consolidated Financial Statements were stretched to justify the numbers. Analysts warn that if this kind of valuation gymnastics becomes a trend, it could distort balance sheets and erode trust in financial reporting across the sector.
These concerns are not abstract. They go to the heart of how banking stability is measured. If temporary loans are dressed up as permanent capital, and if asset values can be inflated overnight by thousands of percent, investors and depositors may begin to doubt the accuracy of bank balance sheets. This doubt could fuel mistrust in the system at a time when confidence is critical.
To be clear, the Unity-Providus merger has immediate practical benefits. It stabilises a struggling lender, saves jobs, and strengthens the balance sheet of the combined entity, at least on paper. Regulators may also argue that extraordinary measures are justified to protect systemic stability. But analysts caution that the deal’s creative accounting and regulatory accommodations must not become the rule. Otherwise, Nigeria risks sending the signal that financial rules are flexible when convenient, a reputation that could damage both investor sentiment and international credibility.
As it stands, the merger has gone through, and Unity Bank will not collapse.
However, the questions raised by BusinessNG’s EMIU — about whether a repayable loan can truly qualify as Tier 1 capital, and whether asset valuations can justifiably increase 28-fold within a year — remain unanswered. For Nigeria’s banking sector, the bigger issue is whether this merger will be remembered as a bold rescue of a weak institution or as a dangerous precedent that muddied the waters of regulatory governance
