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‘More expensive than subsidy?’ — Is FG’s N5,000 transport grant dead on arrival?

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Zainab Ahmed, minister of finance, budget, and national planning, said on Tuesday that the federal government would remove fuel subsidy by 2022 and replace it with a N5,000 grant for the poorest Nigerians. According to her, about tens of millions Nigerians would benefit from the transport grant.

Following the revelation, Nigerians online and offline have weighed in on the policy, raising quite a number of reservations about the policy, which is billed to take off sometime between February to June 2022.

While some say the policy is inevitable, following the fiscal condition of the Nigerian states, others differ, emphasising that Nigeria is an oil-producing country and should not have to pay so much for petrol.

TheCable on Wednesday reported that Nigeria had the third-lowest petrol pump price in Africa, after Angola and Algeria. This position strengthens the argument for keeping oil subsidies — if other oil-producing states are doing it, Nigeria can keep subsidies too.

On the flip side, some Nigerians believe the removal of subsidies is long overdue. This school of thought claims that Nigeria is at least 10 years late to the party. They see subsidies as unsustainable, inefficient, and responsible for the lack of competition in the oil sector.

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However, a large chunk of both schools of thought does not entirely believe in the idea of giving N5,000 transport grants to the poorest Nigerians. Some say the grant will be more expensive than the existing fuel subsidy and would have an even worse impact on state finances.

Zainab Ahmed taking questions at NDU launch event

TheCable has reviewed all we know about this policy to draw informed conclusions on the subsidy removal and replacement plan.

You may have seen claims online suggesting that N5,000 for 40 million Nigerians monthly, would amount to N2.4 trillion, which is more than the existing subsidy payments of about N1.8 trillion per year. Mathematically, this is correct. But according to what we know about the policy, this is not exactly the case.

Speaking at the launch of the Nigeria Development Update (NDU) hosted by the World Bank, the minister of finance, said the number of beneficiaries would vary between 20 million and 40 million.

During her opening speech, she said: “Ahead of the target date of mid-2022 for the complete elimination of fuel subsidies, we are working with our partners on measures to cushion potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40% of the population.

“One of such measures would be to institute a monthly transport subsidy in the form of cash transfer of N5,000 to between 30 – 40 million deserving Nigerians.”

For 30 million Nigerians, the cost of maintaining this grant per year will be N1.8 trillion, which is also as bad as the subsidy payment itself. Going by what the minister initially said, the cost of the grants is worse. This drives the argument for keeping subsidies.

However, the minister also said during the panel discussion that the grant may not get to all 40 million Nigerians, suggesting that the final numbers will be dependent on available resources. This means a lot less than N1 trillion may eventually be spent on delivering the policy.

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TIME: FEBRUARY OR JUNE 2022?

Another challenge with the project is the timeline; questions abound on when exactly this project would kick-off. According to the Petroleum Industry Act, subsidies should be removed by February 2022. But according to the 2022 budget, subsidies will be paid till June, 2022.

Two contradicting pieces of legislation? Not exactly. When the PIB was signed by President Muhammadu Buhari, the president set up an implementation committee to execute PIA within the space of one year.

The committee, in line with the ministry of finance, budget and national planning, made room for subsidies till June 2022, but the removal could be as early as February to save the government some subsidy funds.

Will December, January, February be enough time to convince Nigerians on subsidy removal? Time will tell.

The beneficiaries would be identified as they were with other SIPs under the Buhari government, but payments will not be made physically like this

HOW WOULD THE 40M NIGERIANS BE SELECTED?

Yes, this is a recurrent question. But according to the minister, the selection process will build on the existing conditional cash transfer register used by the office of the vice-president in administering payments to poor and vulnerable Nigerians in the past.

The minister said the government will be working with state governments and non-governmental organisation (NGO) to ensure that the people who get the grant are the ones who actually get the funds.

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DEAD ON ARRIVAL?

The World Bank recommended that Nigeria “implement a large-scale (covering 25% to 50% of the population) and time-bound targeted cash-transfer program to mitigate impacts of high inflation and the PMS subsidy removal.”

It also asked the government to “redirect savings from PMS subsidy to finance primary health, basic education, and rural connectivity projects” with the country.

The bank estimates that subsidy savings could be as high as N3 trillion per year. If that is the reality, then Nigeria can go ahead with the cash transfers, and still have some money to finance primary health, basic education, and rural connectivity projects.

However, going by 2019 figures, subsidy savings will be less than N2 trillion, while N5,000 to 40 million Nigerians will amount to N2.4 trillion. At that rate, there will be no savings for other projects recommended by the bank.

Dead on arrival? A lot will depend on the final implementation plans.

TheCable

 

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Breaking: CBN jacks up interest rate to 15.5%

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The Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 14 per cent to 15.5 per cent to tame rising inflation.

The interest rate was raised from 13 per cent to 14 per cent in July this year.

The monetary policy rate is the baseline interest rate in an economy, every other interest rate used within an economy is built on.

Governor of the CBN, Godwin Emefiele, addressing journalists on Tuesday after the committee’s meeting in Abuja, said 10 members of the committee voted for the rate hike.

In August, Nigeria’s inflation rate rose to a nearly two-decade high at 20.52 per cent.

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Lamborghini pushes out final Aventador, Ultimae, ends V12 supercar

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Supercar manufacturer, Lamborghini, has announced the production of the last Aventador. You can call it Avantador’s last dance. The final Lamborghini Aventador Ultimae was rolled off the production line in Sant’Agata, Italy, and kissing goodbye to V12-powered supercar that shaped an era. The Lamborghini V12 will be hybridised going forward.

This Ultimae Roadster marks the 11,465th Aventador to reach customers worldwide. First launched in 2011, the Aventador is not exactly modern, but when it debuted, it was described by CEO Stephan Winkelmann as “a jump of two generations in terms of design and technology,” with “performance that is simply overwhelming.”

A plug-in hybrid replacement is expected to be revealed later this year, having been spied testing.

Lamborghini made sure the final model was the most powerful, with the 6.5-litre unit producing 10bhp more than in the previous range-topping Aventador, the Lamborghini Aventador SVJ, sending 769bhp (780PS, hence the name) to both axles. The Aventador-based Essenza SCV12 produces 819bhp but is limited to track use.

The Ultimae’s 531lb ft torque peak matches the SVJ’s, with which it shares its power- to-weight ratio. But with a 0-62mph time of just 2.8sec and a top speed of 221mph, the Ultimae is the fastest road-going Aventador.

The 350 coupés and 250 roadsters – each sold with a numbered plaque – were offered in a range of unique colour schemes, including a new grey-on-grey option with contrasting red trim elements, while the roadster could be specified with an exposed carbonfibre roof panel. It was also subtly marked out from other Aventadors by way of a unique styling package that “took the best components” of the S and SVJ.

The Aventador’s plug-in hybrid replacement will serve as a bridge to pure-electric Lamborghini models in the future.

This electrified future will see the Hurácan and Lamborghini Urus also go down the same route, and an all-electric 2+2 introduced in the second half of the decade.

Importantly, however, while its replacement will use an electrified drivetrain, it will take the bulk of its power from a large-capacity V12, in line with company boss Stephan Winkelmann’s commitment to the emotional value of its supercars.

He told Autocar last year that there is “a lot of emotion attached” to the 12-cylinder engine, which he is particularly aware of, having been involved in the launch of the Aventador in his first stint as the boss of Lamborghini in 2011.

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How to use your pensions for mortgage

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The National Pension Commission recently approved the guidelines to access Retirement Savings Account balance for payment of equity contribution for residential mortgage by RSA holders.

The approval was in line with Section 89 (2) of the Pension Reform Act 2014, which allows RSA holders to use a portion of their RSA balance towards payment of equity for residential mortgage.

PenCom however specified conditions to access the funds. A major condition is that the applicant must be in active employment, either as a salaried employee or as a self-employed person.

It stated that application for equity contribution for residential mortgage must be in person and not by proxy.

How to apply

Anybody who is interested can approach his PFA to get explanation on the process. The PFA will print the statement of account and determine the 25 per cent.

Speaking with our correspondent, the Spokesperson, PenCom, Abdulqadir Dahiru, said, “Then when you have that, you can now go back to your mortgage lender, get a letter of offer of your property, go through their own due diligence to agree for them to finance because the pension is only giving you 25 per cent; 75 per cent will still be financed by somebody.

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“That person must give you an offer letter for a loan that he is ready to finance you, and this is the equity contribution you are required to bring. So if you have that equity contribution with that letter of offer, which has been validated by the mortgage lender, that is when you can approach your PFA to request for your 25 per cent.”

Maximum amount allowed

PenCom stated that the maximum amount to be withdrawn is 25 per cent of the total mandatory RSA balance as of the date of application, irrespective of the value of equity contribution required by the mortgage lender.

Where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, the RSA holders may utilise the contingency portion of their voluntary contributions (if any).

Consent form

If a person had accessed part of the funds before either for leaving paid employment before retirement age, he will still get lump sum at retirement. He can still get part of the funds for mortgage after meeting specific conditions stated in the guidelines, but he must sign a consent form to get it.

Aisha Dahir-Umar, DG National Pension Commission

Dahiru said, “If you have taken 25 per cent for temporary loss of job and then you get employment again, and you continue contributing and you come to collect for a mortgage, you will sign a consent to say that I’m fully aware that this money I want to withdraw to finance a house will affect the amount I may likely take when I retire, I understand and whatever.

“So, basically you are indemnifying the PFA that you understand so that at the point of retirement, if your benefit is lower compared to your colleagues you will not complain.”

Mortgage lender

To qualify as a mortgage lender for the purpose, the company must be licensed by the Central Bank of Nigeria, comply with the Contributory Pension Scheme and have valid Pension Clearance Certificate, according to PenCom’s guidelines.

Eligibility

According to PenCom, a worker must have an offer letter for the property duly signed by the property owner and verified by the mortgage lender. The RSA of the applicant must have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years). A contributor under the Micro Pension Plan is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application.

Age limit

RSA holders that have less than three years to retirement are not eligible.

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Dahiru explained, “If I am an employee and working in an organisation where the retirement age is 55 years, if I am 50, or 51 years, I can access because I have five years or more than three years to retire. But once I get to 52 that, means I have three years which I cannot access.”

According to PenCom’s guidelines, married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements.

Data recapturing

RSA holders, if registered before 1 July 2019, must have their records updated through the RSA data recapture exercise.

Dahiru said, “But it’s very important that RSA holders have done their recapture. When you have not done your data recapturing, we can’t process it.”

Insufficient 25 per cent contribution

The PenCom spokesperson said, “Where the 25 per cent the mortgage lender is asking for is equal to the 25 per cent of your RSA, definitely we will process. But if what mortgage lender is asking for is higher than what you can get from your PFA, you will have to look for the difference and pay and show evidence to your PFA.

“For instance, if your mortgage lender is looking for N2.5m and the mortgage is N10m, and the mortgage lender says bring 25 per cent as equity contribution, and your own 25 per cent in your RSA is only N1.5m, you will have to look for that difference of N1m and pay; then come with it with your offer letter for the property and the evidence that I have paid, then your PFA will give you the balance of N1.5m which is your 25 per cent.”

Punch

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