Nigeria’s Evolving Data Policy Will Destroy Startups

Nigeria’s Evolving Data Policy Will Destroy Startups

Today, we released a Data Risk Report to clients we offer advisory services in Nigeria: Nigerian government wants all telecom data to be stored locally. This is a very huge issue, as if government moves ahead, this can escalate to fintech, blogs, ecommerce and all sectors. Most Nigerian startups host their data outside Nigeria because the local alternatives are largely more expensive.

Yet, you may not blame the local hosting companies for being more expensive; they run generators and they hire their private security guards unlike their foreign counterparts. So, if this evolving mandate is enforced, many Nigerian startups would fold. It is evident that many would be unable to afford the rates of most local data center companies. This is going to become the biggest challenge for any Nigeria-based startup.

The House of Representatives has called on the federal government to mandate the Localisation of Data and Operations by Telecoms firms in the country in the interest of national security.

The house urged the Federal Ministry of Communications to take necessary action to address all undermining activities of the telecommunication firms operating in Nigeria by ensuring strict compliance with Data municipal laws.

This was sequel to a unanimous adoption of a motion by Chukwuemeka Ujam (PDP- Enugu) on Wednesday at the plenary.

[…]

He said that prevention was better than cure as it was not safe to leave such critical information in the hands of foreigners.

The Speaker of the House, Yakubu Dogara, mandated the Committee on Information Technology to ensure compliance.

I do hope government does not make this a blanket rule. Currently, one can get hosting services with $20 at JustHost or HostGator for a year [yes, it is crappy but it is a service nonetheless]. That affordable price has helped in expanding the number of web companies in Nigeria. But where the local hosting ordinance regulation plays, these small entities will disappear.

While Nigeria must work on its national security, the fact remains that Nigeria has to invest in some critical infrastructure before it makes some of these rules. Running a data center in Nigeria is not easy without constant electricity since you want websites to be available all the time. So, without light, you are essentially telling these small entrepreneurs to go first and raise thousands of dollars for local hosting which will involve buying big generators to power the servers. Many would not do that.

The Available Options

As I noted in a piece on data hosting in Nigeria, we have four main players: MainOne, MTN Cloud, Rack Centre and Vodacom. These companies are not necessarily priced for non-venture backed startups. For some, you need to have few thousands of dollars before you can begin. Many Nigerian startups would not afford the amount. While these hosting companies are evolving, they remain optimized for enterprise clients.

There are four main cloud providers in Nigeria – MainOne, MTN Cloud, Rack Centre and Vodacom. Two of these companies, MainOne and Rack Centre, have cloud services as one of the key components of their businesses. Sure, MainOne sells bandwidth, delivering connectivity services, but cloud service is a key business. MTN is known for its voice telephony and the broadband services, across Nigeria and beyond. Vodacom Nigeria is largely there to serve enterprise customers, since it is not operating any voice telephony service, yet.

For MTN, MainOne and Rack Center, which I have reviewed their cloud offerings extensively for clients, as part of my company advisory services in Nigeria, the data center technical capabilities are largely the same. They meet most of the industry top standards. However, the pricing model is totally different. (I will not get into which one is most affordable since they do not make their prices public).

Potential Implications to Nigeria

If Nigeria does not do the basic things before pushing this regulation across all sectors, it would simply make these startups to do what many have done in most countries where such laws have been put in place. Yes, many startups would just re-incorporate in U.S. and then pay U.S. taxes even though the customers are Nigerian customers. Provided the government does not block their IP addresses [they must block Netflix, Google, Facebook, etc before they could do so], nothing much would change. It is always harder to police digital companies unlike industrial-age firms with their lands and physical domains.

Besides, hosting is not just about space; it involves looking at companies with primitives and code libraries which can make developments faster. Working with AWS saves me thousands of hours because it has many primitives which I can adapt for my designs. If the local hosting firms cannot offer such [many do not], any mandate would not move Nigeria forward on the path of innovation. Yes, we would not stagnate because we are cut-off from the best in the world. So, I hope this law holds for only telecoms; they have the money to comply, locally!


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