Question Tag: correspondence advance

In order to ameliorate the transportation challenges being encountered by civil servants, Welfare State of Nigeria gave motor vehicle, tri-cycle, and motorcycle loans and advances for its workers. The workers were granted loans and advances equivalent to their annual basic salary. The total fund available for the loan was N1 billion. The officers that applied for the loans and their grade levels are as follows:

• 250 officers – GL 01 – 05 at an average annual basic salary of N258,000;
• 100 officers – GL 06 – 07 at an average annual basic salary of N450,000;
• 50 officers – GL 08 and above at an average annual basic salary of N650,000.

The interest rate payable on the loans and advances is 12.5% p.a. to take care of the time value of money.

Required:
(a) You are required to calculate:
i. The total loans and advances that were given to the workers, showing the balance of the fund not yet accessed.
(10 Marks)
ii. The aggregate interest paid on the loans and advances.
(2 Marks)

(b) Discuss:
i. Four conditions which have to be fulfilled for the grant of correspondence advance.
(4 Marks)
ii. Two requirements for granting and repaying correspondence advance.
(4 Marks)