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40 days of Twitter ban: FG’s projected tax earnings undermined by fewer users

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The Twitter Inc. logo is seen behind an Apple Inc. Photographer: Michael Nagle/Bloomberg via Getty Images


• Twitter unlikely to bend rules as losses reach N96b, says Teniola
• SMEs contributing 48% to GDP worst hit by ban – survey

While the country awaits the meeting between the Federal Government and the management team of Twitter to resolve the impasse between the two, findings have shown that the planned tax earnings from technology companies, especially Twitter might not really be pronounced.
   
This is because contrary to claims that there are about 40 million Twitter users, findings have shown that there are just 3.05 million potential audience that Twitter reports can be reached with adverts on the platform.
   
According to digital report 2021 by Hootsuite, a social media and marketing dashboard, Twitter’s potential advertising audience compared to the total population aged 13 plus in Nigeria is 2.4 per cent, while quarter-on-quarter change in Twitter’s advertising reach is 17.3 per cent.
 
The implication of this is that Twitter’s penetration in the country is still very low compared to other platforms. Analytically, it equally means that it is unlikely that these 3.05 million adverts audience would also be impacted by the American company. 

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Indeed, as of January 2021, data from Statista, a German company specialising in market and consumer data, revealed that there were just 33 million active social media users in Nigeria. Interestingly, out of this 33 million, WhatsApp had the largest number of users at 93 per cent; Facebook 86.2 per cent; Youtube 81.6 per cent; Instagram 73.1 per cent; FB Messenger 67.2 per cent; Twitter 61.4 per cent; Telegram 56.3 per cent, and LinkedIn 32.8 per cent.
   
While Nigeria is not in Statista’s list of the top 20 countries ranked by Twitter users, USA has the highest number of users at 73.2 million, while Malaysia is the 20th, with 3.4 million active users.
   
Statista’s data is sourced from Twitter itself, as well as third party companies such as DataReportal, including social media management firm Hootsuite.
   
Hootsuite said its data is sourced from several third-party providers, including GlobalWebIndex, GSMA Intelligence, Statcounter, Alexa, and Statista.
   
To buttress the low penetration status of Twitter in the country, some years back, Nairobi, Kenya-based Portland Communications and Tweetminster had analysed over 11.5 million geo-located Tweets originating from Africa. It revealed that South Africa, Kenya and Nigeria are the most active tweeting countries in the continent.
  
The firm disclosed that South Africa was the continent’s most active country by volume of geo-located Tweets, with over twice as many Tweets (5,030,226 during a particular quarter of the year) over the next most active country, Kenya (2,476,800). Nigeria was the third most active during the period with 1,646,212 tweets. Egypt (1,214,062) and Morocco (745,620) make up the remainder of the top five most active countries.
  
Speaking with The Guardian on the faceoff between the Federal Government and Twitter, Nigeria Coordinator, Alliance for Affordable Internet (A4AI), Olusola Teniola, said it appears that FG may seek a way forward by lifting the ban on Twitter since the likelihood of Nigerians migrating to another platform is not forthcoming and the platform is a lifesaver for many budding entrepreneurs.
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Teniola said he believes that the Presidency needs to step in and ensure that the President or whoever has authorisation over his account engages with the CEO of Twitter to resolve the impasse.
  
“It is highly unlikely that Twitter will bend its rules to accommodate what the Minister of Information and Culture seeks,” he stated.
  
On likely affected Twitter ad users, the A4AI Nigeria boss admitted that the 3.05 million users appear to be the real figure “and a potential user base of 10x by 2030 with all things being equal. The tax revenue from this user base can be described as a drop in the ocean compared to the tax that can be generated from all the MSMEs relying on this platform to create economic activity.”
  
On the impact of the ban, Teniola described it as a public relations disaster on both sides and a massive ripple effect on Nigeria’s digital economy drive. He said with high unemployment, this episode couldn’t have occurred at a worse time for the country.
  
Teniola, a former president of the Association of Telecommunications Companies of Nigeria (ATCON), urged government to restore investors’ confidence as it is sending mixed signals.
  
“FG needs to align its expectations concerning taxing of tech companies with what the G7 and Organisation for Economic Cooperation and Development (OECD) countries are planning with regards to a global digital tax. Nigeria cannot afford to operate as an island in this respect and there is an urgent need for the FG to improve on the ease of doing business to create jobs and taxes from these jobs created on the back of investments that may be made in the digital tech environment.”

MEANWHILE, the Twitter ban in Nigeria has entered its 40th day, with accruable losses to the country now in excess of about N96 billion. 
  
NetBlocks, a watchdog organisation that monitors cybersecurity and governance of the Internet, said each hour of the suspension costs Nigeria $250,000 (N102.5 million), bringing the daily loss to N2.46 billion. Invariably, it means the economy would have lost over N96 billion in the last 40 days.

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On the planned meeting, industry sources said many things would be a deciding factor during negotiation, including the fact that there are fewer ad users of the platform in the country; the possibility of Twitter registering formally in Nigeria; ease of doing business, free speech environment, and online freedom, among others.
    
The government had on June 4, 2021, announced the suspension of Twitter two days after the platform deleted a tweet by President Muhammadu Buhari, which was offensive to some users. Three weeks after the suspension, on June 22, the President set up a committee consisting of five ministers to negotiate with Twitter.
  
The Minister of Information and Culture, Alhaji Lai Mohammed, was appointed as the head of the committee, which included Minister of Communications and Digital Economy, Isa Pantami; Minister of Foreign Affairs, Geoffrey Onyema; Minister for Works and Housing, Babatunde Fashola (SAN); Minister of State for Labour and Employment, Festus Keyamo (SAN); and the Attorney-General of the Federation, Abubakar Malami (SAN).
  
While the ban remains and negotiation is also yet to begin three weeks after the committee was set up, the Federal Government has expressed its interest in taxing big technology companies that are making ‘huge profits’ out of the country. Those in this net include Google, Facebook, Instagram and Twitter.
  
Already, checks have revealed Nigeria won’t be the only country imposing taxes on some of these companies. For instance, under applicable local tax law, Facebook is responsible for remitting applicable VAT included in sales to customers in Kenya and Cameroun.
  
As such, Vice President Yemi Osinbajo has said that Nigeria is to explore legal provisions to collect taxes on profits made locally by global technology and digital firms not based in Nigeria, but with significant economic presence in the country.
   
Osinbajo had stated this during an interaction with a delegation from the Chartered Institute of Taxation of Nigeria (CITN), led by its President, Adesina Adedayo, at the Presidential Villa, Abuja, recently.
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Osinbajo’s spokesman, Laolu Akande, in a statement, quoted the VP as saying: “While the Federal Government will not be raising tax rates at this time, based on the Finance Act 2019, it is already empowered to widen the tax net.
 
“This includes collecting taxes on the Nigerian income of global tech giants with a significant economic presence here, even if they have not established an office or permanent establishment, and are currently not paying taxes in Nigeria.
 
“In this regard, Section 4 of the Finance Act 2019, provides that the finance minister, may by order of the president, determine what constitutes the significant economic presence of a company, other than a Nigerian company. We have had severe economic downturns, which of course imply that we may not be able to collect taxes with the aggressiveness that would ordinarily be expected.”

In its 2020 SME Survey, PwC, a multi-national professional services network of firms, reported that SMEs contribute 48 per cent of national Gross Domestic Product (GDP), accounting for 96 per cent of businesses and 84 per cent of employment.
Citing a report of the National Bureau of Statistics (NBS), the group says SMEs in Nigeria have contributed about 48 per cent of the national GDP in the last five years.

It added that with a total number of about 17.4 million, they account for about 50 per cent of industrial jobs and nearly 90 per cent of the manufacturing sector, in terms of number of enterprises. This sector is the major casualty of the Twitter ban.

Lydia Ume, a writer and digital content strategist, lamented the impact of Twitter on businesses, particularly the long-term negative impact of resort to use of VPN, which many businesses have been forced to embrace to maintain their online outposts.

She said, for instance, measurement of the success of business strategies will be affected. She explained that one of the metrics used to measure the success of business marketing strategies is how many people see their content. According to her, the higher it is, the more likely it is to convert those eyeballs to customers.

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“Although VPN allows businesses to stay online, you can’t trust or accurately measure performance since the data is skewed from the location changes,” she said.

“Your potential customers’ VPN might be set to Italy or San Francisco, so the algorithm reduces your content’s visibility to them because they are not considered your ideal audience. It’s not just social media, a lot of digital experiences are customised based on your location.”

“Additionally,” she said, “digitisation helps to level the playing field, especially in a country that claims small businesses are the backbone of the economy. Social media plays a significant role in helping businesses grow and remain profitable and businesses need that competitive edge.”

Prince Nathan, a digital marketing executive, noted that before the ban, businesses could run marketing campaigns using accurate data provided by Twitter, decipher where, how, and who their target audiences are and how best to reach them.

“But currently, with the use of VPN, prospective clients tweeting from Nigeria are shown as living in the U.S., UK or Somalia and that messes up the algorithm and your ability to pinpoint where your prospects congregate.”

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