Despite significant investments in Nigeria’s data center sub-sector, there are concerns about the low capacity utilization of these facilities compared to other countries in the region, such as South Africa and Kenya. Challenges include firms, government agencies, and banks hosting their data abroad, as well as issues like unreliable power supply, foreign exchange shortages, and multiple taxation.
Nigeria currently has over 11 data centers, primarily in Lagos, followed by Abuja and Kano, with total investments exceeding $230 million. The market size is projected to reach $415 million by 2028, growing at a compound annual growth rate (CAGR) of 10.34 percent, and local capacity is expected to grow at a CAGR of 23.24 percent in the global projected $517 billion data center market by 2030. Lagos State reported attracting $1 billion in data center investments in 2021.
However, despite these developments, Nigeria, and Africa as a whole, accounts for only one percent of the world’s data centers despite having 17 percent of the global population. This is attributed to Nigeria’s recent focus on digitization and emerging technologies, driven by the presence of multiple undersea cables landing on its shores.
Currently, data centers in Nigeria include Open Access Data Centre (OADC), Rack Centre, MDXi (MainOne, an Equinix Company), Medallion (Digital Reality), 21st Century, ADC, MTN, CEWA, Galaxy BackBone, and 9mobile, among other smaller players. However, their combined operational capacity is approximately 20MW, significantly below what a country with over 200 million people should have, which should be at least 700MW. This undercapacity is evident as a single data center operator in South Africa, Teraco, has a capacity larger than all 11 data centers in Nigeria combined.
While local hosting of data has increased, with telecom operators and ICT firms hosting data locally, many government Ministries, Departments, and Agencies (MDAs) still host their data abroad, contributing to capital flight. The National Information Technology Development Agency (NITDA) guidelines encourage data localization, but around 55 percent of government MDAs still host data abroad. Local hosting has helped save around $40 million annually on local internet traffic, but there is still room for growth.
Challenges to the growth of data centers in Nigeria include power supply issues, forex availability, multiple taxation, a slow and complex permitting process, and the complexity of migrating services from abroad to local data centers. The government needs to address these challenges to realize the full potential of data centers in Nigeria and foster a truly functional digital economy.