First Bank of Nigeria is considering a potential merger ahead of a Nigerian banking industry recapitalisation, the local media reported.
First Bank is in talks with Heritage Bank and Polaris Bank. Both banks are also looking for a potential partner after being instructed by the Central Bank of Nigeria (CBN).
Godwin Emefiele, governor at the Central Bank of Nigeria revealed last year that the recapitalisation of banks had become significantly important as their current capital could no longer finance large transactions. He also said that the drop in the value of the naira to the dollar has weakened the capital of banks.
Last year, the Central Bank of Nigeria further revealed that seven commercial banks in the country failed stress test as a result of inadequate funding at the end of 2018.
In a financial stability report, the apex bank also revealed that in less than 30-day period analysis, seven Nigerian banks were not adequately funded, while in the 31-90 days period, nine banks had funding issues. The names of the banks, however, were not revealed.
Overall, the industry showed an excess of N4.8 trillion assets over liabilities.
With regard to the merger, FBN Holding, parent company of the First Bank of Nigeria said in a stock exchange statement, “There will always be speculations on First Bank’s involvement on account of its size, liquidity, systemic importance and historic support in backstopping the industry.”
“Similar to other Nigerian banks, First Bank continues to scan sub-Saharan Africa in general for potential acquisitions. FBN Holdings is mindful of its responsibilities as a premium board-listed company and will make appropriate disclosures should it find such value.”
As a result of the planned recapitalisation, we may see many other Nigerian banks signing merger and acquisition deals in the near future.