The Central Bank of Nigeria (CBN) has given approval for a financial package worth N700 billion to support the proposed merger between Unity Bank Plc and Providus Bank Limited.
The bailout represents the first under Olayemi Cardoso, CBN Governor.
The CBN in a statement on Tuesday, disclosed that it has granted approval for financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited.
Giving the rationale for the bailout, the CBN said it is aimed at strengthening the stability of Nigeria’s financial system.
In a letter to the management of Unity Bank PLC, the CBN outlined detailed terms and structure of the financial accommodation which has a term of 20 years.
Details of the CB intention show that the loan amount is N700 billion with a 20-year term, with a minimum interest rate of 6 per cent.
Repayment terms of the lon indicate that payments will be semi-annual, with a principal moratorium of five years, meaning no principal payments are required for the first five years, but from the sixth year, the new entity will repay the loan in 15 equal installments until maturity.
The transaction also contains terms which require that Unity Bank settles existing obligations of N303.7 billion from the bailout funds.
The obligations include a N92.00 billion exposure from First Bank of Nigeria related to clearing obligations, N51.70 billion financial accommodation from the CBN N25.00 billion under the Anchor Borrowers Programme, and N135.00 billion obligation to NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending).
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.
