By Stanley Onyeka, Lagos and Tochukwu Bliss, Abuja
The Central Bank of Nigeria (CBN), has announced the approval of the sum of N700 billion as part of “a crucial financial accommodation” to support the proposed merger of Unity Bank Plc and Providus Bank Limited.
This approval signals the first merger following CBN’s directive to banks to increase their minimum capital base, even as the union awaits the consent of the Securities and Exchange Commission (SEC).
A statement yesterday signed by the acting Director, Corporate Communications, CBN, Hakama Sidi-Ali, to this effect, did not however state the amount, which was contained in an acceptance letter by the apex bank’s Acting Director, Banking Supervision Department, Adetona Adedeji, to the Managing Director of Unity Bank Plc.
Ms Sidi-Ali merely announced that: “The Central Bank of Nigeria has granted approval for a pivotal financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited.
“This strategic move is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.
“The merger is contingent upon the financial support from the CBN. The fund will be instrumental in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders.
“It is unequivocal to state that the CBN’s action is in accordance with the provisions of Section 42 (2) of the CBN Act, 2007.
“This arrangement is crucial for the financial health and operational stability of the post-merger organisation.”
She added that “The CBN’s decision underscores its dedication to maintaining financial stability and promoting confidence in the banking system during this transformative period.”
Background to approval
A letter dated July 22, 2024, and titled, “Re: Request for Merger Approval and Financial Support,” by Mr. Adedeji, to Unity Bank’s Managing Director, was in response to an earlier letter dated June 19, 2024, seeking permission for a merger and financial assistance.
The letter further reads: “Following a review of your letter, we write to inform you that the Central Bank of Nigeria has approved your request as follows:
“A financial accommodation totalling N700billionn to the new entity, structured as a 20-year term loan. The loan will be priced at an interest rate of MPR minus 11%, subject to a minimum of six per cent. Payments are to be made semi-annually, with a principal moratorium of five years.
“Beginning in the sixth year, the new entity will commence repayment in 15 equal instalments until maturity.
“Total obligation of Unity Bank amounting to N303.7 billion (comprising N92.00 billions of First Bank of Nigeria exposure on clearing obligation, N51.70 billion financial accommodation of the CBN, N25.00 billion Anchor Borrowers Programme obligation and N135.00 billion NIRSAL obligation) will be deducted from the N700 billion financial accommodation. The obligations to the CBN and NIRSAL will be settled accordingly.
“The balance of N396.30 billion from the financial accommodation is to be invested in a 20-year Federal Government of Nigeria bond. The N396.30 billion invested in the 20-year FGN bond will qualify as a Tier 2 capital instrument and component of the shareholders’ fund.
“Unity Bank’s current Cash Reserve Ratio shortfall of N117.90 billion is hereby waived from being debited. Providus Bank’s CRR balance, post-merger, will serve as the opening balance of the new entity.”
The letter further noted that “These terms are subject to your acceptance and full compliance. Kindly confirm your acceptance of the outlined terms.”
The loan will be priced at an interest rate of MPR minus 11%, subject to a minimum of six per cent. Payments are to be made semi-annually, with a principal moratorium of five years.
Complementary union
Responding, the two banks in a joint statement yesterday, expressed their pleasure over the CBN’s approval of the merger.
The statement reads: “This merger represents a strategic and complementary union that will leverage the strengths of both banks to create a leading financial institution in the industry with footprints in retail, corporate, commercial, and digital banking.
“Unity Bank Plc, with its rich legacy of over 18 years, has established a robust retail banking network, comprising more than 220 branches nationwide.
“With a strategic niche in the agricultural business, our commitment to delivering exceptional customer service and a comprehensive range of financial products has earned us the trust and loyalty of millions of customers.
“Providus Bank Limited, on the other hand, is renowned for its innovative approach to banking, boasting a strong digital footprint, innovative products, high-quality service culture and strong focus on helping customers grow.
“As a fast-growing new-generation bank, Providus Bank has consistently pushed the boundaries of technology to deliver cutting-edge financial solutions that cater to the evolving needs of modern consumers.”
According to them, the partnership was driven by a shared vision to provide an unparalleled banking experience to our customers.
They continued: “By combining Unity Bank’s extensive branch network and deep-rooted customer relationships with Providus’s digital prowess and innovative spirit, we aim to deliver a seamless blend of traditional and modern banking services.
“Our customers will benefit from an expanded suite of products and services, greater convenience, and improved access to banking solutions across various channels. The integration of our digital platforms will offer enhanced security, faster transactions, and a more personalized banking experience.
“As we embark on this journey together, we remain committed to maintaining the highest standards of corporate governance, financial stability, and customer satisfaction.
“Our united team of dedicated professionals will work tirelessly to ensure a smooth transition and continued tradition of excellence in all our operations.”
