Facebook is innovating on tax, and that will make many countries happier. In short, if the social media giant follows through on its new plan, Nigerian government will benefit: it will pay “full” taxes on ad sales generated in Nigeria. That is a good thing.

Facebook is making changes to its tax structure under pressure from U.S. and European authorities. CFO Dave Wehner said Tuesday it will in future pay taxes in the countries where it actually makes ad sales, rather than funneling international business through its Irish subsidiary, where it enjoys a disproportionately low tax rate. The EU is working on plans to force digital companies to book sales closer to the ultimate buyer, making it easier for tax authorities to capture the value-added (Source: Fortune Newsletter)

In the past, most technology companies have worked to reduce their tax burdens across the world by domiciling their effective businesses, for tax purposes, in tax havens where they pay low taxes. But with this move, the implication is that Facebook will pay full taxes in countries where the revenues are generated.

I think Google and Uber could follow this lead from Facebook. Doing that will be fair to developing countries, as paying full taxes will make their missions even more believable. It makes sense to pay taxes on the domains where the ad sales happened, and there is no better corporate social responsibility than that. They can setup the local selling structure which Facebook is working on.

Facebook Inc. is changing its tax structure so that it will pay taxes in the country where sales are made, rather than funneling everything through its Irish subsidiary.

The company said it will move to a “local selling structure” in countries where it has an office to support sales to local advertisers. Menlo Park, California-based Facebook shifted its international business operations to Ireland in 2010

[..]

“We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries,” Chief Financial Officer Dave Wehner wrote Tuesday in a statement.

Mitigating the Dislocation

Nigeria’s Federal Inland Revenue Service (FIRS) wins if these companies adopt this tax paying paradigm. We need to thank the European Union for the heat on these companies. Nothing would have made Facebook to change its tactics, if not for the onslaught from the EU on Google and Apple. A new tax system is needed in the world because technology has changed the dynamic structures of firms and how they relate with nations, and their competitors.

The implication of this local selling structure is huge. Facebook makes money through ads anchored on aggregation construct. Increasingly, aggregation business which Google and Facebook are leaders will continue to disrupt newspaper companies, crippling their revenue structures. It is very obvious that this trajectory will continue in the near future, locally and internationally. But where Google and Facebook decide to pay taxes to Nigeria on the ad revenue made in Nigeria, the impact of this business dislocation, at least on tax purposes, will be manageable. It simply means that taxes government lost from Guardian and ThisDay are now paid by Facebook and Google.

Under the aggregation construct, the companies that control the value are not usually the ones that created them. Google News and Facebook control news distribution in Nigeria than Guardian, ThisDay and others. Because the MNCs tech firms “own” the audience and the customers, the advertisers focus on them, hoping to reach the readers through them. Just like that, the news creators have been systematically sidelined as they earn lesser and lesser from their works. But the aggregators like Facebook and Google smile to the bank. The reason why this happens is because of the abundance which Internet makes possible. Everyone has access to more users but that does not correlate to more revenue because the money goes to people that can help simplify the experiences to the users who will not prefer to be visiting all the news site to get any information they want. They go to Google and search and then Google takes them to the website in Nigeria with the information. Advertisers understand the value created is now with Google which simplifies that process.

The impact of the aggregation is that value, especially on ad revenue, will move from media companies to aggregators like Google and Facebook to the extent that companies like Guardian and ThisDay will experience diminished revenues, even when their products are making money for Google and Facebook. The new tax structure Facebook plans to implement will not redesign the business dynamics, but the Nigerian taxman will certainly get a relief because even if Guardian and ThisDay will not send the tax money, it is sure that Facebook and Google will. By doing that, this new model will save the taxman.

Facebook needs to be commended for this, and I do hope other foreign companies follow the lead and implement local selling structure. It makes sense for a fair and just world. You cannot deny Nigerian government tax money just to bread more millionaires in America through inflated earnings. But with this, it cannot be any better: pay the tax where the ad sales happened, so that in future you can have more ad sales, as the local economy will be supported with the taxes you have paid.

As the year draws to a close, the following federal ministers of the Nigerian nation are My Ministers of the Year – 2017.

• Minister of Finance – Kemi Adeosun: She has tirelessly worked to reform the structure and nature of Nigeria’s finances. Her efforts on processes demonstrate a clear vision to build enduring institutions. From TSA to improving the nation’s tax revenue, this woman has served her nation, at the highest level, excellently.
• Minister of Agriculture and Rural Development – Audu Ogbeh and Heineken Lokpobiri. Mr Ogbeh may not be fashionable, but he is building a system that connects a new generation of Nigerians into farming. He is pushing reforms to make it possible for farmers to become business-people, by phasing out elements of the broken Anchor Borrowers Scheme without clear enablers. A strong advocate for farmers, under his watch, the nation has pumped money into agriculture even as he mobilizes citizens to embrace agriculture. Mr. Ogbeh is strongly supported by his junior minister Heineken Lokpobiri.
• Minister for Communication – Adebayo Shittu. Barr Shittu is the hardest working minister in the cabinet. There is nothing he has not touched. He is working to reform many government businesses under his ministry despite obvious challenges before him. But you cannot blame him for lack of trying. From reforming NIPOST to NigComSat to starting an ICT University, Barr Shittu is everywhere. The impacts may not be obvious because he is tackling all these without much budget. But you can see a man that is action-oriented, doing all to make real impacts.
• Minister of Industry, Trade and Investment – Okechukwu Enelamah and Aisha Abubakar: The duo of Mr. Enelamah and Ms Abubakar are working to establish one of the most promising trade agreements in the history of Nigeria. As they do this, they are helping to dismantle all the ills of doing business in Nigeria. People just have to give them time. Anyone registering a company today will know that Corporate Affairs Commission works better. The recent uptick in the Ease of Doing Business in Nigeria is a clear sign both are working.

That is my opinion, as an entrepreneur and a citizen of Nigeria.

A new probe has raised an alarm that there may be new funds “hiding” somewhere in NNPC (Nigerian National Petroleum Corporation) which are yet to be remitted to the Federation Account. (NNPC is the oil corporation through which the federal government of Nigeria regulates and participates in the country’s petroleum industry.) The missing amount is estimated to be worth N30 billion.

An account reconciliation activity for crude oil transactions found gaps in the corporation’s reporting and remittances to the Federation Account for the month of October 2017.

State governments had boycotted the Federation Account Allocation Committee (FAAC) meeting on November 23, accusing the NNPC of cutting corners in reporting and remitting of receipts from oil in the period under review. The states insisted on thorough collation and reconciliation through representatives agreed upon by all the parties.

The ensuing investigation and reconciliation uncovered the sum of N58.369 billion in unremitted funds and forced the state-owned company to issue fresh payment mandates to the Central Bank of Nigeria (CBN) to fund the Federation Account as well as the joint venture production (JVP) Account by the same amount.

The Guardian learnt that N30 billion of the N58.369 billion meant for remittance was allegedly withheld, as it could not be traced in the Federation Account

Simply, NNPC is still struggling to develop the capacity to reconcile its books with the Nigerian people. This may not be corruption; it could simply be lack of process, within a very complex Corporation, and the interrelationships it maintains with different segments of the Nigerian government, from the Federal Ministry of Finance to the Central Bank of Nigeria. It is a broken process and if General Buhari cannot fix it, it means we need to have a new strategy as a nation.

Yes, there is a way we can deal with this problem: take NNPC public and get its business done in the stock market. That way, all the missed and hidden money will be checked by market dynamics with dedicated experts looking at these numbers, more passionately, because they have fiduciary stakes in them..

NNPC Needs Capital

Nigerians may not know: NNPC does go to markets to raise capital. It just got a new one, closing  $3.7 billion through alternative funding arrangement. This is clear evidence that NNPC needs capital to run its operations, and I do think that a publicly traded exchange can make the process of raising capital better. Besides, it has gone to the bond markets in the past; so, nothing is really new going to the capital market to look for capital.

THE Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Dr. Maikanti Baru, yesterday said the corporation has secured $3.7 billion in alternative financing agreement in the last three years.

Baru, who disclosed this at the 35th  Annual Conference of the Nigerian Association of Petroleum Explorationists, NAPE, in Lagos, said securing external funding arrangement was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of Nigeria’s energy future.

Benefits of listing NNPC

There are many benefits for taking NNPC public. Some are:

• Governance: Taking NNPC public will improve its governance especially if it is listed in a foreign exchange like London Stock Exchange and New York Exchange besides Nigerian Stock Exchange. That improved governance will help its impacts to the Nigerian people. I do think it will return higher value to Nigerians compared to what we get today. But there is risk: you do not want excessive market activism on a national corporation.
• Liquidity in NSE: The Nigerian Stock Exchange will benefit with a listed NNPC. It will bring liquidity in the exchange. I promise you that NNPC Plc will bring many Nigerian retail investors back to the bourse.
• Human Welfare: Through better governance and transparency, Nigerians will win through improved human welfare: yes, more money will be remitted and paid to the Nigerian people, on time.
• Financials: The NNPC financial management will have higher discipline with severe implications, as deviating from standards can be considered a financial crime.
• Capital Funding: NNPC and Nigeria will likely raise billions of dollars which can go a long way to finance important capital projects. An IPO by NNPC will bring liquidity to modernize our infrastructure. It will be a great moment in our history if the leadership utilizes the money well.
• Profit-Center: In markets, NNPC will be managed as a profit-center where the leadership will be tasked to run it efficiently so that Nigeria and the investors will make money. Today, it is largely a cost-center with no meaningful balance sheet.
• Investors Win: I do not have the total reserves of NNPC and the correct books to calculate how much profit it could make in a year, but I know that we could be looking in billions of dollars. Also, we need to know the present revenue and cost elements to model the profits.  But no matter what, NNPC makes money and investors will see glory. If they do not presently make money, no one will be talking of missed remittance into the Federation Account.

The Challenges to Listing

It will be very hard for Nigeria to list and still be a member of OPEC (Organization of Petroleum Exporting Countries), an intergovernmental organization for some oil producing countries. Listing means that Nigeria is going for market forces and the whole construct of reducing production, to inflate barrel pricing, could be challenged by some investors [most will want you to keep pumping]. Also, foreign exchanges may not welcome plans to artificially manipulate prices, through supply suppression, as such could be illegal based on market guidelines. (Yes, oligopoly is not an Igbo word [Igbo is my native Nigerian language], it is an English word, and that means, it happens. But some foreign exchanges can make life tough if you do it the way OPEC does it. Yet, Petrobras Brazil has been handling the issues for years. I know that NNPC Plc can find a way to handle such also if the issue arises. )

Another issue will be auditing and preparing NNPC books for IPO. That one will be a very tough order and a big challenge for Nigeria. We will have to note our reserves capacity, total revenue, our profitability, taxes, etc. You need those pieces to model the profitability of NNPC Plc and potential dividend it could pay to investors. Disclosing the production capabilities and revenue, every quarter, may be tough and that is why I do not think we will have NNPC Plc. Nigeria is NNPC and NNPC is Nigeria: some things are better left classified, unfortunately.

But note that since NNPC is Nigeria, if we list NNPC, it means that we have listed Nigeria for the world to see. This is the main reason why NNPC Plc will not happen.

For investors, there could be risks as companies like Petrobras (Brazil) and Gazprom (Russia) have shown that energy companies, owned by states never give up control, after privatization. They always run them in secrecy pushing investors into hopelessness. That is why NNPC Plc may not be a slam dunk if Nigeria wants to take it public. Nigeria will be pushed to allow managers to manage it well for markets to cheer: doing that will not be easy.

The Valuation

Nigerian can get a valuation of $300 billion for NNPC Plc (lol): that is not even half of Apple’s. Yet, we can start there, and on the first day of trading take it all the way to $350 billion. We like big numbers. Imagine the possibility of the valuation of NNPC Plc becoming higher than our GDP. If we manage NNPC Plc very well, we can see many good things. (The numbers I am dropping here is not science, as I do not have access to NNPC books, to estimate its EPS, profitability etc.)

I will suggest we list in London Stock Exchange and Nigerian Stock Exchange. The Nigerian Stock Exchange has no liquidity to accommodate NNPC. So, we can have a really small amount there. At about $40 billion total market capacity, Nigerian Stock Exchange cannot offer any help to NNPC Plc. NNPC Plc needs a big ocean and unfortunately, we do not have that in Nigeria. So, we can hit London, Hong Kong or New York where total market values go in trillions of dollars.[This could be dangerous as activist investors will like to mess NNPC Plc up in foreign lands. Maybe, we just leave all in NSE, and hope they pump money home to take the advantage.]
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All Together

NNPC is not Transcorp which killed the dreams of many investors when it tanked in the Nigerian Stock Exchange. Transcorp, unlike NNPC, did not have any asset when it started. It was a business people invested based on promises and expectations. But NNPC has one of the best assets in continental Africa. NNPC is Nigeria and it generates products which are exported around the world. It is a rainmaker, generating more than 80% of Nigeria’s foreign exchange. A listed NNPC will be massively (globally) oversubscribed and will drive huge capital accumulation in Nigeria. It will be a moment of glory. But yet, more money has never improved Nigeria. So “selling” NNPC to the market may not change anything in the long-term. That is the most unfortunate thing about Nigeria, and the reason why NNPC Staff, the Labour Union and students will say “HELL NO, DO NOT DO IT”.

We have finalized all elements of the new book – Cybersecurity and Digital Forensics: Policy, Management and Technology. It will be available to present, old and new subscribers from Jan 2, 2018 here on Tekedia. For marketing purposes, it does not make sense to publish a book in December. That is why it will be unveiled next month; we do not want it to be old within few days.

It is a very comprehensive book on cybersecurity policy, cybersecurity management, cybersecurity technology, cybersecurity intelligence, and digital forensics. You will like it.

As always, one Tekedia subscription makes all our wares available to you.

TABLE OF CONTENTS

Beginning

Preamble

About the Author – Ndubuisi Ekekwe, PhD

Structure of Information Systems

1.0       Computer Fundamentals

1.1       Fundamentals of Internet

1.2       Number Systems

1.3       Information System and Business

Information Security

2.0       Access Control Techniques

2.1       Account Administration

2.2       Account Accessibility

2.3       Authentication Techniques

Network Vulnerabilities

3.0       Networking Types, ISO Model

3.1       Networking Devices, Topologies

3.2       IP Address, MAC Address & Ports

3.3       DNS & DHCP Server

3.4       Network Vulnerabilities & Types of Attacks

Foundation of Cybersecurity

4.0       Hacking

4.1       Phases of Ethical Hacking

4.2       Testing

4.3       Cyber-Warfare and Cyber-Terrorism

4.4       Security Implementation and Governance

BYOD & SMAC Security

5.0       SMAC

5.1       SMAC Security & Forensics

5.2       BYOD

5.3       BYOD Security & Forensics

Preventing Cyber Intrusion

6.0       What is Cyber-Attack?

6.1       Cyber-Attack Response Plan

6.2       Compliance Plan Against Cyber-Attack

6.3       Technology for Preventing Cyber-Intrusion

Emerging Cybersecurity Tech

7.0       Emerging Cybersecurity Tech

7.1       Changing Trends in Cybersecurity

7.2       Social Media Role

7.3       Cybersecurity Techniques

7.4       Cyber Ethics

Ethical Hacking

8.0       Basic

8.1       Purpose of Ethical Hacking

8.2       Hackers -Types, Purposes and Goals

8.3      Phases of Ethical Hacking

8.4     Cyber warfare and Terrorism

Malware Analysis

9.0       Malware – Variants, Infections and Effects

9.1       Malware Analysis – Goals, Types

9.2       Method of Malware Analysis

9.3       Setup

9.4       FUD and Avoidance

Penetration Testing & Tools

10.0     Basics of Penetration Testing

10.1     PenTest – Types, Models, Methodologies

10.2     Vulnerability Assessment vs. Penetration Testing

10.3     Penetration Testing Tools

10.4     Penetration Testing Distributions

Intrusion Detection and Prevention

11.0     Intrusion Detection System (IDS)

11.1    Intrusion Prevention System (IPS)

11.2     IDS vs. IPS vs. Firewall

11.3     Common Detection Methodology

Network & OS Security

12.0     Network Security – Basics, Forms, Prevention

12.1     OS Security Threats

12.2     Cryptography-Network and OS Security

Ethics in Information Technology

13.0     Morals, Ethics, and Laws

13.1     Ethics in Business

13.2     Ethics in Information Technology

13.3     IT Policy

Security Policy Analysis

14.0     Security Policy and Law

14.1     Policy Development – Process & Lifecycle

14.2     Policy Types & Standards

14.3     Policy Troubleshooting

Security Policy Implementation

15.0     Identify Needs Issues/Threats

15.1     Identify the Policy Users

15.2     Review & Write Policy

15.3     Train and Enforce Policy

15.4     Review and Modify

Global Cybersecurity Policy & Law

16.0     Cyberspace & Cybercrimes

16.1     Information Warfare & Legal Issues

16.2     National Cybersecurity Policy & Law

16.3     International Law & Policy

16.4     Legal Process & Punishment

Enterprise Cybersecurity Policy

17.0     Enterprise Cybersecurity Policy

17.1     Vulnerability Assessment & Risk Analysis

17.2     Security Testing Frameworks

17.3     Vulnerability Prevention

17.4     Tools & Techniques

Physical & Human Security Management

18.0     Physical Security

18.1     Physical Security Threats

18.2     Planning and Executing

18.3     Physical Security Checklist

18.4     Theft and Locks Picking

Human Security Management

19.0     Human Security

19.1     Social Engineering Techniques

19.2     Dumpster Diving & Shoulder Surfing

19.3     Phishing & Countermeasure

19.4     Staff Training

Cybersecurity Essentials for Leaders

20.0     Planning & Managing Enterprise Information System

20.1     Planning & Managing Enterprise Network Structure

20.2     Privacy & Human Security Management

20.3     Planning & Managing Security Assessment & Testing

20.4     Disaster Recovery/Contingency Planning

Cyber Incident Analysis and Response

21.0     Cybersecurity Incident & Risk

21.1     Planning & preparing for Cyber Incident

21.2     Planning Cybersecurity Incident Response

21.3     Planning Risk Management

21.4     Disaster Recovery & Business Continuity

Building Secure Enterprises & Organizations

22.0     Secure Enterprises & Organizations

22.1     Scope and Approach

22.2     Business Goals & Security

22.3     Baseline Analysis & Desired State

22.4     Policy and Procedures

Cybersecurity Project Management

23.0     Cybersecurity Project Management

23.1     Key factors for Success

23.2     Frameworks for Cybersecurity Management

23.3     Implementation of Framework

23.4     Basic Tenets

Digital Forensics & Evidence

24.0     Digital Forensics

24.1     Digital Forensics Model

24.2     Approach and Process

24.3     Evidence Gathering & Assessment

24.4     Evidence Examination

SMAC & BYOD Forensics

25.0     Social Media Forensics

25.1     Mobile Forensics

25.2     Cloud Forensics

25.3     BYOD Forensics

25.4     Digital Forensics Lifecycle

Guarding Against Cyber Intrusions

26.0     Attacks, Tools for Defending Against

26.1     Privileges and Access Rights

26.2     Policy for Users and Organizations

26.3     Contingency Plan

26.4     Training

Information Systems Security & Assurance

27.0     Information Systems Security & Assurance

27.1     Information Security

27.2     Information Assurance

27.3     Information Security and Assurance

Cyber Intelligence & Counter Intelligence

28.0     Cyber Intelligence

28.1     Information for Strategic Decision

28.2     Counter Intelligence

28.3     Governments & Businesses

28.4     Incident handling & Damage control

29. Conclusion