Central Bank of Nigeria Approves Merger between Unity Bank and Providus Bank
The Central Bank of Nigeria (CBN) has approved the merger between Unity Bank and Providus Bank, a move that marks a significant milestone in the evolution of both institutions.
The approval comes after the CBN directed banks to increase their minimum capital base, with commercial banks required to increase their capital base to N500bn, national banks to N200bn, and regional banks to N50bn.
In addition to approving the merger, the CBN has also granted financial support totaling N700bn to the new entity, to be repaid with an interest rate of six percent over 20 years.
The financial support is structured as a 20-year term loan, with a five-year moratorium before repayment begins. The loan will be priced at an interest rate of MPR minus 11 percent, subject to a minimum of six percent.
The CBN has also agreed to deduct Unity Bank’s total obligations, amounting to N303.7bn, from the financial accommodation. These obligations include exposure on clearing obligations, financial accommodation, Anchor Borrowers program obligation, and NIRSAL obligation.
The balance of N396.30bn from the financial accommodation will be invested in a 20-year Federal Government of Nigeria bond, which will qualify as a Tier 2 capital instrument and component of the shareholders’ fund.
The CBN has also waived Unity Bank’s current Cash Reserve Ratio shortfall of N117.90bn, which will not be debited.
The CBN has confirmed the approval and financial support in a letter to Unity Bank, stating that the terms are subject to acceptance and full compliance.
The CBN has issued a statement explaining that the approval and financial support are designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.
While the CBN has approved the merger, the financial institutions are still awaiting the approval of the Securities and Exchange Commission (SEC).
Unity Bank and Providus Bank have issued a joint statement welcoming the CBN’s approval and stating that the merger represents a strategic and complementary union that will leverage the strengths of both banks to create a leading financial institution.
