Notwithstanding the investments that have gone into Nigeria’s data centre sub-sector, there are concerns that capacity utilisation of these facilities remains very poor when compared to other countries within the region, including South Africa, Kenya and others.
Apart from the challenge posed by firms, government agencies, banks, which still host their data abroad, operators in the data centre sub-sector still face other notable issues including epileptic power supply, shortage of foreign exchange, multiple taxation and others, reports The Guardian.
Today, there are over 11 data centres in Nigeria, located largely in Lagos, then Abuja and Kano, which have thus far seen over $230 million investments with a market size projected to hit $415 million by 2028 and is to grow at a compound yearly growth rate (CAGR) of 10.34 per cent. Local capacity is expected to grow by a CAGR of 23.24 per cent of global projected $517 billion by 2030. Lagos State claimed to have attracted $1 billion data centre investment in 2021.
Despite all these, Nigeria and indeed Africa is home to only one per cent of the world’s data centres despite being home to 17 per cent of the global population.
Arguably, the little development seen in Nigeria’s data centre market is traceable to its recent focus on digitisation and the incorporation of emerging technologies like Internet of Things (IoT), big data, artificial intelligence (AI), machine learning (ML) and advanced network connectivity services. This is said to have been driven by the availability of Nigeria having all the subsea cables landing at its shore.
For instance, there is ACE, 20 Tbps; Glo1, 2.5Tbps; SAT3, 120 Gbps; WACS, 15 Tbps; MainOne, five Tbps; Equiano, 150 Tbps; 2Africa, 180 Tbps and NCSCS, 13 Tbps.
A data centre is a dedicated space within a building, or a group of buildings, used to house computer systems and associated components, such as telecommunications and storage systems.
The data centres operating in Nigeria include the Open Access Data Centre (OADC) by WIOCC Group Company; Rack Centre; MDXi (MainOne, an Equinix Company), Medallion (Digital Reality); 21st Century; ADC, MTN, CEWA; Galaxy BackBone and 9mobile, among other smaller players.
Checks by this paper showed that these players boast of about 55MW computing power, over 30,000 racks capacity combined and are Tiers 3 and 4 data centres.
But going by the latest report from Xalam Analystics, the minimum IT capacity a country like Nigeria, with over 200 million people, should have should not be less than 700MW at this time.
Invariably, it means that Nigeria has less than three per cent of the datacenter capacity it should have by now.
A simple confirmation of this point is that a single datacenter operator in South Africa (Teraco) today has operational capacity multiple times larger than the 11 data centres in Nigeria combined.
Indeed, Teraco, founded in 2008, operates seven other facilities in South Africa across Johannesburg, Cape Town and Durban, with 75MW computing power and serves more than 600 customers.
In terms of quantity of data centres, a city like Atlanta Georgia has about 33 data centre providers with 53 data centres, California has 259 data centres with 88 providers, Toronto has 56 data centres with 33 providers, Amsterdam has 55 data centres with 30 providers, London, UK has over 170 data centres.
It is interesting to note that these are cities not countries and some of the cities listed are not among the biggest data centres markets in their country.
Speaking with our correspondent, the Chief Executive Officer, Medallion Data Centre, Ike Nnamani, that launched a new data centre in Lagos, last week, said with respect to IT load, the operational capacity of the 11 data centres in the country, is around 20MW, which is very low compared to other countries.
According to him, data centre capacity is not rated only based on the numbers of data centres but more importantly the IT load in MW that is available in data centres that are operational.
Nnamani, who buttressed Xalam Analytics report emphatically, said: “So when we start talking of Nigeria’s data centre market getting saturated because of the recent new builds coming into the market, it is almost laughable. The fact is that Nigeria will not achieve the goal of having a truly functional digital economy if the core infrastructure that drives the digital economy (data centres, metro fibers, long distance fibres, and high capacity access network) is not in place. A lot more work still needs to be done to get Nigeria to where it needs to be in the digital economy.”
According to him, Nigeria is the country with the largest data centre potential in Africa but currently lagging behind smaller economies.
The reasons the data centre market in Nigeria has remained small over the years despite its potential, according Nnamani, a former President, Association of Telecoms Companies of Nigeria (ATCON), are the challenges with power supply, forex availability, multiple taxation, slow and complex permitting process, among others.
According to him, if these are not addressed there will be growth in the space but it will be slow and remain below the potential.
Nnamani said the government has to fix all these challenges, adding “if we are to attain a truly digital economy with all its benefits.”
He said the strong growth of Africa’s digital economy will drive demand for data centres.
In a document by Nnamani, six regional data center markets emerging in Nigeria, they are Lagos for the South West; Port Harcourt for the South South; Abuja for the North Central; Enugu for the South East; Kano for the North West; Gombe, Yola, or Maiduguri for the North East.
According to him, if the plan for the regional data centre hubs plays out, each of the region is expected over the next 10 years to have data centre capacity of at least 50MW IT load, while the rest will remain in Lagos.
Meanwhile, as mentioned earlier, part of the challenges facing the sector is underutilization. The Guardianhowever, gathered that utilisation improved in the last 18 months, but is still below 50 per cent in the country.
While checks have shown that telecoms operators and other ICT firms host their data locally, governments’ Ministries, Departments and Agencies (MDAs) that should lead in local hosting are increasing the sector’s capital flight by hosting their data abroad.
It was gathered that some 55 per cent of governments’ MDAs still host data abroad despite data localisation guidelines in the country. It was revealed that Israel, Ukraine, UK, USA, were among the countries where some Nigerian data are hosted.
The National Information Technology Development Agency (NITDA), Nigeria’s agency in charge of IT development attested to this challenge of under-utilisation of data centres in the country, especially by the MDAs.
Already, a NITDA mandatory Guideline for Nigerian Content Development in Information and Communication Technology (ICT) encourages indigenous innovation, development of the local ICT industry and establishment of intellectual property and data regulation and protection standards, each of which has a set of related strategic goals.
Specifically, NITDA’s Guideline 9.1 requires all indigenous Original Equipment Manufacturers (companies that produce functional computer devices from component parts bought from other organisations) to assemble all hardware in Nigeria and maintain fully staffed facilities for that purpose. Guideline 11.1(4) requires all telecommunications companies to host all subscriber and consumer data in Nigeria. Guideline 12.1(4) requires all network service companies to host all subscriber and consumer data in Nigeria. Guideline 12.2(1) requires all ministries, departments and agencies of Nigeria’s Federal Government (MDAs) to host their websites locally and under a registered.gov.ng domain. Guideline 13.1(2) requires all data and information management companies to host all sovereign data in Nigeria. Guideline 13.2(3) requires MDAs to host all sovereign data locally on servers within Nigeria.
The Chief Executive Officer of Internet Exchange Point of Nigeria (IXPN), Muhammed Rudamn, said that increase in the number of data being hosted locally, especially telecommunications operators, is saving the country about $40 million yearly.
According to him, this amount is being saved on local Internet traffic, which increased to 60 per cent in 2020 from less than one per cent in 2006.
“The reality is that data is the economic engine of the Internet. With billions of U.S. dollars invested yearly across the globe towards cloud infrastructure by private and public entities, Nigeria must strive to become the hub for Internet content in Africa, not just content consumers.”
Speaking on possible capacity glut, Rudman, said probably, stressing, “but most of these operators are trying to bring foreign content networks such as Amazon, Google, Microsoft, among others to host more content locally. Meanwhile, there is a possibility of local content increasing as well.”
An industry expert, who preferred anonymity, noted that there has been huge expansion on the part of the data centres, including acquisition, revealing that Rack Centre, Medallion, among others.
On acquisition of Nigerian data centres, he said: “Most of the data centres seen in Nigeria are indigenous, for instance, MainOne, at the beginning the investors were locals, same with Medallion, even Rack Centre, but lately they are trying to develop more expertise and capabilities. The data centres that have acquired them lately are global players with higher levels of expertise that will be able to use economy of scale because they are already operating bigger data centres across the globe with the needed expertise more than the locals, who are trying to survive. So, those companies acquiring them have more expertise and lots of funding to invest and skills to showcase. Like Digital Reality, the firm that acquires Medallion is a very big company operating around 200 cities, having a large clientele. By this, it will be able to bring some of these clientele into Nigeria.”
According to him, it is better they come into Nigeria to acquire those already on ground instead of starting afresh.
On why local hosting has not really gained traction, he said before now, the issue had to do with cost, which I think is no more an issue.
“But I can say the level of complexity in terms of migrating the services they are currently operating outside back into the country. There is huge complexity in doing that. So, I think this is a major issue, which discourages them. Also, I can say that some of them hosting outside enjoy bundle services because when you are hosting outside, it is easy to get 20 servers on pay as you go unlike in Nigeria, which is not the same. Also, outside, they have facilities, unlike in Nigeria, where you are mandated to pay out rightly for the service. These facilities are not here,” he stated.
He urged NITDA to touch light MDAs not complying with the Federal Government’s directive on local hosting of data, among others.
According to him, aside from the MDAs, some banks, eCommerce platforms, some airlines, among others still host data internationally.
At an ICT forum in Lagos, the Chief Executive Officer, OADC, Dr. Ayotunde Coker, said that data centre operations in the country are pretty stable even in the slow economy.
However, he said a growing economy will result in increased data centre demand, bolstered by the increasing shift to digital platforms across all parts of the economy, adding that cloud services will grow as businesses focus on acquiring only the level of compute power they require on a pay as needed basis.
Coker said it is worrisome that after so many years of local data centre capacity at world-class quality, there are assertions that MDAs host abroad. He said as local cloud platforms become more available there really is no reason MDAs should not set the example and honour the sovereign data rules and host locally.
A telecoms expert, Kehinde Aluko, said data centres should be fully utilised as designed, as the more entities that are hosting in a data centre, the larger the ecosystem that is created and the more information can be exchanged amongst the interconnecting entities within the data centre, which directly translates to lower cost of information exchange and better user experience.
Speaking on ‘Maintreaming Data Centres in the Nigerian Digital Economy’ at a forum in Lagos, Dr. Chidi Ajuzie said, wherever they are located, the need for data centre is going to increase in the coming years, spearheaded by the use of AI, which depends on massive amounts of data and computing power and lots of electrical energy.
As such, Ajuzie recommended that there was need to ensure regulations and legislations are updated and fit for purpose; creating incentives for the deployment of digital infrastructure; improving power supply to support digital infrastructure operations; expansion of digital infrastructure initiatives; setting of digital services adoption targets for critical sectors; use of Big Data collected from operator networks; ensuring digital literacy and technology skills to support adoption and ensuring that citizens are encouraged to use online digital services.
While calling for more data centre investment, the immediate past Executive Vice Chairman of the Nigerian Communications Commission (NCC), Prof Umar Danbatta, said Nigeria is well-positioned to attract a fair share of the $517.17 billion of the global data centre market.
According to market reports, the global data centre market valued at $187.35 billion in 2020 will reach $517.17 billion by 2030, registering a remarkable cumulative average growth rate (CAGR) of 10.5 per cent from 2021 to 2030.
Danbatta averred that Nigeria provides an appealing destination for more investment in data centre services and operations.