Nigerian companies are developing affordable and localized cloud services as alternatives to global providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. Economic challenges and the quest for digital sovereignty are driving Nigerian entrepreneurs to invest in local cloud infrastructure.
Emergence of Local Cloud Providers
Challenges with Global Providers
In 2020, Nigerian entrepreneur Fara Ashiru launched Okra, a fintech platform, using AWS. Okra faced significant financial pressure due to AWS’s requirement for payments in dollars, while Okra’s revenues were in naira. This mismatch created unsustainable financial strain, particularly as the Nigerian naira depreciated by around 70% against the dollar between 2020 and 2024. Coupled with rising inflation and foreign exchange volatility, the high costs associated with AWS became unsustainable for Okra. Consequently, Ashiru decided to establish the company’s cloud infrastructure in Nigeria and South Africa in 2024, leading to the creation of Nebula. This new company enables Nigerian businesses to run their websites, apps, or workflows on its cloud infrastructure and pay in naira.
Rise of Homegrown Solutions
Nebula is one of several homegrown Nigerian cloud service providers offering affordable and localized alternatives to international giants like AWS, Microsoft Azure, and Google Cloud. Other notable local companies in this sector include Nobus, Galaxy, Suburban, and Layer3. These providers cater to Nigerian businesses by offering the option to pay in naira and ensuring data storage within the country. Local data centers provide advantages such as low latency and data localization, ultimately benefiting Nigerian businesses. By addressing these challenges, Nigerian entrepreneurs have positioned themselves as key players in the cloud services market, offering valuable alternatives to international providers.
Global Providers Adapt to Local Market
AWS Localizes Payment
Global cloud service providers have taken notice of the growing local competition. In January, AWS began accepting payments in naira, indicating recognition of the need to localize the payment experience for customers. This move was an essential step for AWS to remain competitive in the Nigerian market, where local payment options are critical. Notably, Iyinoluwa Aboyeji, managing partner at Accelerate Africa, emphasized the importance of localized payment solutions for maintaining a competitive edge. Aboyeji’s firm routinely advises its portfolio companies to explore local solutions and manage significant costs like cloud services in local currency. Despite this shift, AWS, Microsoft, and Google have yet to respond to inquiries related to their strategy in Nigeria.
Limited Data Center Presence
Despite their global dominance, AWS, Microsoft, and Google have limited data center infrastructure in Nigeria. While these companies have a substantial presence in South Africa, Nigeria has seen only a small AWS local zone data center, which opened in Lagos in 2023. Microsoft’s African presence began with a data center in Johannesburg in 2019, with plans for additional facilities in South Africa and Kenya. AWS followed suit with its first African data center in South Africa in 2020, and Google Cloud recently established a facility in Johannesburg. This limited infrastructure within Nigeria highlights the opportunities for local cloud service providers to expand and cater to the country’s growing tech ecosystem.
Importance of Data Sovereignty
Push for Local Data Storage
As international tensions mount over data storage locations, particularly in the context of the U.S.-China technological divide, countries are prioritizing local data storage solutions for their citizens and businesses. This shift enables Nigerian startups to achieve data sovereignty, a sentiment echoed by Bruce Ayonote, founder and CEO of Suburban Cloud. He emphasized the importance of storing Nigerian data within the country, reflecting a broader push to build local cloud infrastructure to address concerns about data sovereignty. Local cloud services not only address regulatory issues but also build trust among consumers and businesses, who increasingly prioritize data security and privacy.
Government and Private Sector Initiatives
Digital sovereignty could drive the success of smaller Nigerian cloud startups even as AWS begins to accept payments in naira. Chidi Okpala, head of media and corporate communications at Galaxy Backbone, underscored the importance of the data sovereignty narrative. Galaxy Backbone, a private entity created by the Nigerian government to promote interoperability among ministries, has evolved to offer core cloud services to both government agencies and private businesses. The company operates two data centers in Abuja and Kano, reinforcing the importance of local data storage and infrastructure. Government initiatives like these create an environment conducive to the growth of local cloud service providers.
Addressing Latency and Cost Challenges
Benefits of Local Servers
Storing data on local servers not only ensures data sovereignty but also addresses latency issues, which occur due to the time delay between a user’s action and the system’s response. Suburban Cloud’s data center in Abuja helps clients like Netflix and Google minimize latency in Nigeria. Latency is a critical factor in cloud services, as proximity to users significantly affects performance. By establishing data centers within the country, local providers can ensure faster response times for Nigerian users. This improvement in performance makes local cloud services an attractive option for businesses seeking to optimize their operations and user experiences.
Cost-Effective Solutions
While setting up a data center involves substantial financial investment, small Nigerian firms have mitigated these costs through “colocation,” whereby multiple companies share the same data center facility. This approach leverages existing spaces built by telecommunications companies, banks, and established IT firms, reducing the overhead costs associated with building entirely new infrastructure. Olumide Soyombo, co-founder of Bluechip Technologies, noted that several new cloud service startups have adopted colocation to provide cloud services while minimizing setup costs. For instance, Layer3 operates from third-party data centers in Nigeria, with three availability zones: two in Lagos and one in Abuja. This model not only makes cloud services more accessible but also fosters collaboration among local tech companies.
Enhancing Infrastructure and User Experience
Need for Improved Services
Despite the progress made by Nigerian cloud service providers, they must continue enhancing their infrastructure and user interfaces to compete effectively with global giants. While local providers offer reliable services, they often lack the automation and seamless integration provided by AWS. This gap can pose challenges for businesses, particularly those accustomed to the sophisticated features of international providers. For instance, Ugochukwu Okoro, founder and CEO of property technology company Muster, pointed out that while their transition from AWS to GigaLayer yielded benefits, the manual integration required posed challenges for their engineers. Continuous investment in improving the user experience and enhancing automation capabilities will be crucial for the sustained growth of local providers.
Transitioning to Local Providers
Nigerian companies are making strides in developing affordable and localized cloud services, positioning them as viable alternatives to major global providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. This shift is largely influenced by economic challenges within the country and a growing desire for digital sovereignty. Nigerian entrepreneurs are increasingly investing in local cloud infrastructure, recognizing the importance of having data and services managed within the country’s borders. This move not only mitigates the high costs associated with international cloud services but also aligns with a broader strategy to strengthen national technology ecosystems. By focusing on localized solutions, these companies aim to cater to the unique needs of the Nigerian market, offering tailored services that global providers might overlook. This initiative could pave the way for stronger regional tech industry growth, fostering innovation and creating more opportunities for local businesses.
