Diamond and Access Bank Merger - Changing Financial Landscape in Nigeria

January 22, 2020


The Nigerian banking sector is no stranger to mergers and acquisitions. It has probably seen the highest number of consolidation activity within the financial services sector in West Africa. The era of bank consolidation commenced in Nigeria around 2004/2005 when the Central Bank of Nigeria (CBN) increased the minimum capital requirement base of banks from N5billion to N25billion. This policy was introduced due to the challenges which plagued the banks including low capital base, liquidity and poor asset quality. These banks were consequently forced to merge in order to survive the recapitalization process. The wave of consolidation in the banking sector led to the reduction of banks from eighty nine (89) banks to twenty one (21) banks today. The bank recapitalization of 2005 laid the foundation for most of the banks operating today.

On 19th December 2018, Access and Diamond Banks announced that both parties had signed a Memorandum of Agreement in respect of a potential merger between both banks (the “Merger). This article will examine the details of the Merger and the effects of the same on the relevant stakeholders.

What is a Merger?

The Investment and Securities Act 2007 defines a merger as the amalgamation of the undertakings (assets) or any part of the undertakings or interest of two or more companies. It categorizes mergers into three[1]:

  1. Small merger- merger of a value of N500million or less
  2. Intermediate merger- merger of a value exceeding N500million but less than N5billion.
  3. Large merger- merger of a value of N5billion and above

All intermediate and large mergers must be sanctioned by the SEC.

The Access Bank & Diamond Bank Merger

The Board of Access Bank and Diamond Bank announced that they have received a “No Objection” from the CBN to the proposed merger between the banks. Based on the agreement reached by the two financial institutions, Access Bank will acquire the entire issued share capital of Diamond Bank and in consideration, Diamond Bank shareholders will receive N3.13 per share, comprising of N1.00 per share in cash and the allotment of two (2) new Access Bank ordinary shares for every seven (7) Diamond Bank ordinary shares held at the implementation date.

Following the completion of the merger, Diamond Bank would be absorbed into Access Bank and will cease to exist under Nigerian law. The current listing of Diamond Bank’s shares on the Nigerian Stock Exchange and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will also be cancelled, upon the merger becoming effective. The combined bank will retain the Access Bank name and be led by Access Bank’s current Chief Executive Officer, Mr. Herbert Wigwe.

According to the Access Bank CEO, the merger will afford both banks the opportunity of leveraging on their distinct potentials to build a stronger bank. Diamond Bank is expected to benefit from Access Bank’s strong risk management culture and capital management expertise. Diamond Bank has substantial retail banking expertise and strong digital offering which Access Bank will take advantage of. Together, the two companies would create one of Nigeria’s leading banks, with 29 million customers and 32, 000 Point of Sale (POS) terminals.

Transaction completion is subject to the approval of the shareholders of both banks,[2] the CBN, the SEC and an Order of the Federal High Court. The Merger is expected to be concluded in the first half of 2019.

Diamond Bank, had recently faced the possible revocation of its licence due to its non-performing loans of over N150billion and the resignation of three of its directors and the chairman of the board of directors. However it was able to prevent this occurrence by entering into a merger arrangement with Access Bank. This prevented Diamond Bank from facing the same fate as Skye Bank Plc which had its licence revoked in September 2018 due to the depletion of its capital base. The CBN subsequently injected about N786billion into the bank to shore up its liquidity and transferred the operations, assets and management of Skye Bank to Polaris Bank Limited, a bridge bank.

Effect of the Merger

By accepting to merge with Access Bank, Diamond Bank was able to avoid the panic frenzy into which its depositors and investors would have been plunged if it had lost its licence. Such eventuality would not augur well for the reputation and stability of the banking system. The banks customers can currently sleep easy knowing that their deposits are safe.

Furthermore, the objectives of CBN’s policies is to foster a strong, competitive and reliable

banking system, adequately equipped to deliver quality services to the economy. The merger between Access and Diamond Banks is set to birth a foremost tier one bank with a strong capital base. The merger would lead to healthy competition between the new entity and the other existing banks which will further strengthen the banking system.

Despite the positive effect the Merger will have on the banking system, a stakeholder group likely to be adversely affected by the Merger is the employees of the banks, particularly those of Diamond bank. It is expected that after the completion of the Merger, Access Bank will layoff a considerable number of staff, especially for roles which are duplicated in both banks. This could lead to fear of job loss and unhealthy competition among employees.


Mergers and acquisitions in the banking sector have resulted in more efficient banking systems, just as an efficient banking system contributes extensively to the growth in the country. The Merger could not have come at a better time as it will not only rescue Diamond Bank from the looming financial crisis, but also foster depositors confidence in these banks and the financial system at large.

[1] Section 120 of the ISA

[2] Section 121(4) of the ISA

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