Nigerian startups are creating local cloud service alternatives to major providers like AWS, focusing on payment in naira and local data storage. This shift emerges in response to rising costs and data sovereignty concerns, with notable players including Nebula, Galaxy, and Suburban Cloud. Local solutions promise improved latency and address national data management. While challenges remain, the landscape shows promise for future growth in Nigeria’s tech sector.
Nigerian entrepreneur Fara Ashiru established her fintech platform, Okra, on Amazon Web Services (AWS) in 2020. As Okra generated revenue in naira but incurred expenses in dollars, the growing costs became unsustainable due to a 70% depreciation of the naira from 2020 to 2024. “The bills were staggering,” Ashiru lamented, particularly against Nigeria’s backdrop of rising inflation and forex volatility.
Responding to these challenges, Okra launched Nebula in 2024, a local cloud service allowing Nigerian businesses to host their online operations and pay in naira. This initiative joins others like Nobus, Galaxy, Suburban, and Layer3, which aim to provide more accessible cloud solutions compared to major players like AWS, Microsoft Azure, and Google Cloud.
By utilizing local payment options, these companies offer an additional advantage: local data storage. This setup minimizes latency and buttresses data localization efforts, which have become increasingly significant amid rising concerns regarding data access and sovereignty.
In January, AWS acknowledged the importance of local payments by beginning to accept naira. Iyinoluwa Aboyeji from Accelerate Africa remarked, “I think AWS has realized that they must accept naira because if you don’t accept naira you are wasting your time,” indicating a shift in the market dynamics due to local providers.
Nigeria is home to over 19,000 tech startups, with many positioned for growth amid the global competition in cloud services, dominated by AWS, Microsoft, and Google Cloud—who currently lead the African market. Though these major providers have built data centers in South Africa, they lack significant local infrastructure in Nigeria, with only a minor AWS zone in Lagos as of 2023.
The growing awareness of digital sovereignty drives local cloud solutions, enabling Nigerian startups to manage data privacy better. “How does it sound for Nigerian voters’ data to be stored in Europe?” questioned Bruce Ayonote of Suburban Cloud, highlighting the importance of national data management through local infrastructure.
Nigerian cloud startups see digital sovereignty as critical for success. Chidi Okpala from Galaxy Backbone stated, “We are keying into our data sovereignty narrative,” emphasizing the importance of data localization for both governmental and private sector needs.
Local data centers, such as Suburban Cloud’s facility in Abuja, help mitigate latency issues, essential for cloud operations. Ayonote pointed out the necessity of proximity in cloud services, given the high latency associated with remote data hosting.
While the initial investment for setting up a dedicated data center can be substantial, local cloud startups are finding ways to lower costs through “colocation,” sharing facilities with established data centers. Companies like Layer3 are leveraging existing infrastructures to provide reliable services in Nigeria.
Open Access, a leading African data center provider, reports growing demand for colocation services amid increased local cloud solutions. This trend signifies a maturing of Nigeria’s digital economy, where local payment options and reduced latency are increasingly prioritized.
Despite the promising growth of Nigerian cloud services, there remain challenges regarding infrastructure and service quality compared to global giants. Ugochukwu Okoro of Muster, which recently migrated to GigaLayer, noted limitations in automation compared to major players like AWS.
The emergence of local cloud service providers in Nigeria presents a viable alternative to global giants like AWS and Google Cloud. As the demand for data sovereignty and localized services grows, these local firms are uniquely positioned to serve Nigeria’s tech ecosystem. Addressing challenges related to infrastructure and service quality will be crucial for their sustained success in a competitive market.
Original Source: restofworld.org
