Despite significant investments in Nigeria’s data center sub-sector, concerns persist regarding the underutilization of these facilities when compared to other countries in the region, including South Africa and Kenya. Challenges include the reluctance of firms, government agencies, and banks to host their data locally, as well as issues like unreliable power supply, foreign exchange shortages, and multiple taxation.

Currently, there are more than 11 data centers in Nigeria, primarily located in Lagos, Abuja, and Kano. These facilities have received over $230 million in investments, with a market size expected to reach $415 million by 2028, growing at a compound annual growth rate (CAGR) of 10.34%. Local capacity is projected to grow at a CAGR of 23.24% of the global projected $517 billion by 2030. In 2021, Lagos State claimed to have attracted $1 billion in data center investments.

Despite these developments, Nigeria and Africa, in general, only house one percent of the world’s data centers, despite having 17 percent of the global population.

Nigeria’s modest data center market growth is attributed to its recent focus on digitization and the incorporation of emerging technologies like the Internet of Things (IoT), big data, artificial intelligence (AI), machine learning (ML), and advanced network connectivity services. Nigeria benefits from having all the subsea cables landing on its shores, including ACE, Glo1, SAT3, WACS, MainOne, Equiano, 2Africa, and NCSCS.

However, it is noted that Nigeria has less than three percent of the data center capacity it should have, given its population of over 200 million people. Teraco, a data center operator in South Africa, has an operational capacity several times larger than all 11 data centers in Nigeria combined.

Moreover, various cities worldwide surpass Nigeria in terms of data center quantity and providers. For instance, Atlanta, Georgia, boasts 33 data center providers with 53 data centers. Nigeria’s data center capacity is currently around 20MW, which is significantly lower than expected.

The data center market’s slow growth in Nigeria is attributed to challenges such as inadequate power supply, foreign exchange scarcity, multiple taxation, a slow and complex permitting process, and others. To reach its full potential, the government must address these challenges and create a functional digital economy.

The growth of Africa’s digital economy is expected to drive demand for data centers, with several regional data center markets emerging across Nigeria.

Meanwhile, data center underutilization remains an issue, with government Ministries, Departments, and Agencies (MDAs) increasingly hosting their data abroad, resulting in capital flight. An estimated 55 percent of government MDAs still host data abroad, despite data localization guidelines in Nigeria.

Promoting local hosting and fully utilizing data centers is crucial to creating a larger ecosystem for better information exchange and a lower cost of information exchange.

Nigeria has the potential to attract a fair share of the global data center market, valued at $517.17 billion by 2030. To achieve this, Nigeria needs to update regulations, improve power supply, and set digital service adoption targets for critical sectors, among other measures.