The Central Bank of Nigeria (CBN) has approved a substantial financial package worth N700 billion to facilitate the proposed merger between Unity Bank Plc and Providus Bank Limited, as reported by Nairametrics.
This significant move by the apex bank aims to bolster the stability of Nigeria’s financial system and ensure the operational viability of the merged entity.
In an official letter addressed to the Managing Director of Unity Bank, the CBN detailed the terms and structure of the financial accommodation. The package consists of a 20-year term loan specifically designed to support the post-merger stability of the new financial institution.
This bailout is notable as it marks the first financial assistance extended to a commercial bank under the leadership of the new CBN Governor, Yemi Cardoso. It comes in the wake of the liquidation of Heritage Bank, which had led many to believe that the apex bank might refrain from further bailouts for struggling banks.
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The CBN’s official statement confirmed its approval of financial accommodation to support the merger. The statement read:
“The Central Bank of Nigeria (CBN) 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 statement underscored that the merger is contingent upon this financial support, highlighting its essential role in ensuring the financial health and operational stability of the merged entity.
However, the apex bank did not initially disclose the specific amount of financial support approved for the merger. Subsequent findings by Nairametrics have confirmed that approximately N700 billion has been allocated for this bailout.
This financial support package is a critical step in maintaining confidence in Nigeria’s banking sector. By facilitating the merger, the CBN aims to create a more robust and stable financial institution capable of weathering economic challenges and contributing positively to the national economy.
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The move reflects the CBN’s commitment to safeguarding the financial system and preventing potential systemic risks that could arise from the instability of significant banking entities.
Governor Olayemi Cardoso’s tenure at the CBN is thus marked by decisive action to support the banking sector, ensuring that critical mergers and acquisitions are backed by adequate financial resources.
This proactive approach is expected to foster a more resilient banking environment in Nigeria, encouraging stability and growth within the sector.