CBN approves N700bn bailout for Unity, Providus banks’ merger

The Central Bank of Nigeria (CBN) has approved a financial package of N700 billion to support the proposed merger between Unity Bank Plc and Providus Bank Limited.

According to a CBN letter addressed to the managing director of Unity Bank, dated July 22, 2024, payments of the loan are to be made “semi-annually”, with a principal moratorium of five years.

Outlining the conditions and framework of the financial accommodation in the letter, the regulator said the goal of the bailout is to reinforce the stability of the country’s financial system.

The CBN said the bailout is a 20-year term loan that is intended to guarantee the merged entity’s operating stability.

“The loan is priced at an interest rate of MPR minus 11%, subject to a minimum of 6%,” the letter reads in part.

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.

The apex bank said the remaining balance of N396.30 billion from the bailout facility would be invested in a 20-year federal government of Nigeria (FGN) bond.

On August 7, the CBN approved the merger of Unity Bank Plc and Providus Bank Limited, adding that it has approved a “pivotal financial accommodation” to support the proposed merger between the two financial institutions.

On March 29, the apex bank announced an upward review of the minimum capital requirements for commercial, merchant and non-interest banks.

The CBN adjusted the capital base for commercial banks with international licences to N500 billion, while national and regional financial institutions’ capital bases were pegged at N200 billion and N50 billion, respectively.

Also, CBN raised the merchant bank minimum capital requirement to N50 billion for national licence holders.