*The Central Bank of Nigeria announces its approval for a pivotal financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited, in a strategic move to bolster the stability of the financial system and avert potential systemic risks in the country鈥檚 banking system

Isola Moses | 绿帽献妻

The Central Bank of Nigeria (CBN) has granted approval for a pivotal financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited.

Mrs. Hakama Sidi Ali, Acting Director of Corporate Communications at CBN, Tuesday, August 6, 2024, stated that the Bankers鈥� Bank measure is a 鈥渟trategic move is designed to bolster the stability of Nigeria鈥檚 financial system and avert potential systemic risks鈥� in the banking sector of the economy.

The Bank announced the proposed merger is contingent upon the financial support from the CBN.

The statement further noted: 鈥淭he fund will be instrumental in addressing Unity Bank鈥檚 total obligations to the Central Bank and other stakeholders.

鈥淚t is unequivocal to state that the CBN鈥檚 action is in accordance with the provisions of Section 42 (2) of the CBN Act, 2007.

鈥淭his arrangement is crucial for the financial health and operational stability of the post-merger organisation.鈥�

The banking sector regulator stressed that 鈥渘o Nigerian bank currently faces a precarious situation comparable to that of Heritage Bank, which was recently liquidated.鈥�

鈥淭he CBN remains committed to safeguarding depositors’ interests and ensuring the smooth functioning of the banking sector through proactive measures and strategic interventions.

鈥淭he CBN鈥檚 decision underscores its dedication to maintaining financial stability and

promoting confidence in the banking system during this transformative period,鈥� stated the CBN Acting Director of Corporate Communications.

N700bn financial package for Unity Bank Plc and Providus Bank Limited merger

绿帽献妻 learnt the Central Bank of Nigeria approved a financial package of N700 billion to support the proposed merger between Unity Bank Plc and Providus Bank Limited.

The Bank鈥檚 decision was contained in a letter addressed to the Managing Director of Unity Bank, dated July 22, 2024, stating that payments of the loan are to be made 鈥渟emi-annually鈥�, with a principal moratorium of five years.

Outlining the conditions and framework of the financial accommodation in the letter, the regulator disclosed the objective of the bailout for the banks鈥� merger is to reinforce the stability of the country鈥檚 financial system, report stated.

The CBN as well announced the bailout is a 20-year term loan that is intended to guarantee the merged entity鈥檚 operating stability.

The regulator鈥檚 letter stated: 鈥淭he loan is priced at an interest rate of MPR minus 11%, subject to a minimum of 6%.鈥�

The CBN said Unity Bank must settle the existing obligations of N303.7 billion from the bailout funds.

Others, according to the letter, include a N92 billion of First Bank of Nigeria exposure on clearing obligation, N51.7 billion financial accommodation from the CBN, and N25 billion under the anchor borrowers programme initiative.

Also, the regulator said Unity Bank would repay a N135 billion obligation to the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).

The obligations, CBN said, would be deducted from the N700 billion financial accommodation.

According to the Bank, the remaining balance of N396.30 billion from the bailout facility would be invested in a 20-year Federal Government of Nigeria (FGN) bond.

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