Why do we have a unitary vehicle licence renewal model? By Simbo Olorunfemi

Writing yesterday around the issue of annual payment of a fee for ‘proof of ownership’, I queried the idea of a uniform vehicle licence regime across all the States of the Federation.

I made the point that I didn’t see it as a good idea for the Joint Tax Board to pronounce a uniform payment for obtaining and renewing vehicle licence across the Federation, as the state of the economy and cost of living differ across states. It did not also strike me that such a policy can be in tandem with expectations under a Federalist arrangement, such as we have.

It was an off-hand remark, as it was not directly my focus then. As I mentioned then too, I was not quite sure what is the practice is in other Federalist jurisdictions.

I have now checked up on what the practice is in the United States of America. I have found out that I was right with my hunch that the practice in other federations might be different from what we have here.

The cost of registration of a new car varies from one state to the other, within the range of $30 to $50. Unlike Nigeria where renewal is annual across board, renewal period ranges from one to three years, depending on the laws of the State.

Now, my point is not that we must necessarily be in alignment with what obtains in the US, it is just that in a matter of this nature, I simply cannot see a justification for our unitary structure. I cannot see the sense in our abberation.

In the first place, I do not even understand how we came about a uniform tax regime for vehicle registration, renewal fees under the auspices of the Joint Tax Board in a Federation in the first place. They also fix the fee for obtaining drivers licence and number plate for vehicles.

It might be one of the takeaways from the days of the military. The uniformity also applies to the mandatory third party insurance for vehicles. For some strange reason, NAICOM, the regulatory organ in the insurance industry operates with a similar unitary template, pronouncing a uniform fee for third party insurance across the Federation.

Again, a check with the US shows that vehicle insurance cost varies across the different States. Why are the insurance companies not allowed to compete among themselves over this free pot of soup, with millions paying premium and only a few making claims?

Back to the vehicle registration/renewal business, I believe that the current uniform model is not the best and here are my thoughts around that:

1. The Joint Tax Board, comprising of the FIRS and Tax Authorities from all States of the Federation, is overplaying its role as a body set up for ‘uniformity of standards’.
2. Uniformity of standards, to me, does not necessarily mean uniformity of rates and should not be construed to mean so, as is currently the case.
3. Each State should be able to prescribe its own set of fees, with the Joint Tax Board, at best, setting a band within which States can set their rates.
4. When it comes to renewal of vehicle licences, my guess is that the level of compliance is not that good in many of the States, especially those that have not computerised the process.
5. Apart from Lagos, which has a fully computerised process that has now being extended to issuance of road- worthiness/MOT certificate, I doubt that renewal of vehicle documents is taken that seriously elsewhere. I see that the level of compliance in Abuja is not close to that of Lagos at all.
6. With the uniformly high rates across the country, the process for renewal across many states might still be as compromised as they used to be in Lagos, with officials and touts being the major beneficiaries.
7. Back then, people simply issued vehicle insurance papers in the name of non-existing insurance companies (for the sake of police checkpoints), with fake vehicle registration documents and fake customs papers all over the place.
8. In the spirit of Federation and competition, and also to help the States generate more revenue, the idea of a uniform fees schedule should be set aside. States should be able to ‘compete’ among themselves on this, with vehicle owners free to register or renew at a State of their choice, either on account of lower rate or ease of doing business.
9. States with low level of compliance can lower their rates to encourage more vehicle owners to comply. It is a low-hanging fruit from which they can generate revenue. I believe that the poorer states are better served by lower rates than queuing up behind rich states with strong technical infrastructure to jack up rates.
10. The idea of a flat insurance fee should be done away with, allowing for all insurance companies to set their rates and be more creative with the terms governing the insurance policy so they can better service their consumers.