The Central Bank of Nigeria approved a financial package worth N700 billion to support the proposed merger between Unity Bank Plc and Providus Bank Limited, according to a document seen by Daily Trust.
According to the apex bank, the bailout is aimed at strengthening the stability of Nigeria’s financial system, as confirmed in an official letter from the CBN, which detailed the terms and structure of the financial accommodation.
The letter, addressed to the Managing Director of Unity Bank, outlines a 20-year term loan designed to ensure the operational stability of the merged entity.
This represents the first financial bailout of a commercial bank under Yemi Cardoso as Central Bank Governor. It is also coming on the heels of the liquidation of Heritage Bank which many had thought was a sign that the apex will not be bailing out banks.
According to other terms of the transaction seen by our reporter, it contained terms that require that Unity Bank settle existing obligations of N303.7 billion from the bailout funds.
This includes a N92.00 billion exposure from First Bank of Nigeria related to clearing obligations,
Another N51.70 billion financial accommodation from the CBN N25.00 billion under the Anchor Borrowers Programme.
Others include N135.00 billion obligation to NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending).
These obligations will be deducted from the N700 billion financial accommodation.
The remaining balance of N396.30 billion from the financial accommodation will be invested in a 20-year Federal Government of Nigeria (FGN) bond.
This investment will qualify as a Tier 2 capital instrument, contributing to the shareholders’ funds of the new entity.
The letter also states that Unity Bank’s current CRR shortfall of N117.90 billion will be waived ensuring that Providus Bank’s CRR balance post-merger will serve as the opening balance for the new entity.
