Coker: Banks Must Act Now on Data Localisation

CEO, Open Access Data Centres, Ayotunde Coker, speaks about the need for banks to be active in carrying out CBN’s directive on data localisation, its impact on Nigeria’s economy and businesses, among other issues, Emma Okonji presents the excerpts CBN recently directed all financial institutions to host their payment data locally in Nigeria by January 1, 2027. How will the directive positively impact on Nigeria’s economy and businesses? The economic impact of the CBN directive on Nigeria’s economy and businesses is enormous. If fully implemented, it will send strong signals to foreign cloud providers that host Nigeria’s data abroad, that they’re going to be losing their Nigerian customers, if they don’t invest in Nigeria and if they refuse to partner with established local cloud providers in Nigeria. By the time they realise this, they will begin to channel their investment portfolio to Nigeria and also partner with local cloud providers to host Nigeria’s data in Nigeria. This will attract more investments to Nigeria, boost business growth and efficiency of data centres in Nigeria, and such growth is going to be significant because of the support chain that exists in the country. The CBN directive will also increase employment by attracting significant investment in terms of build-outs. It will increase GDP growth as local cloud providers will expand capacity. Feedbacks from the directive shows that most financial institutions are not willing to return all their data hitherto hosted outside Nigeria, for some personal reasons. What is the implication of this? There are implications for non-compliance to CBN’s directive on data localisation, but I cannot speak for CBN because I don’t work with CBN. But one thing that is certain is that financial institutions in Nigeria are heavily regulated, just like the telecoms sector. Those that play in those sectors, know it fully well and would not want to violate any directive from their regulators. With regards to the issue of non-compliance, the banks have their core banking, and if there’s one thing that the banks won’t mess about with, is the cloud hosting. Banks and financial institutions run their core banking applications and sensitive data on clouds that are hosted outside the shores of Nigeria. Local cloud providers also host Nigeria’s data on AWS Cloud or Microsoft Cloud or Google Cloud, or Oracle Cloud platforms that are domiciled in the United States of America, United Kingdom and other countries outside Nigeria. Foreign hosting negates Nigeria’s sovereignty with grave security implications, which the Nigerian Data Protection Act is against. What is the possibility of data hosting companies in Nigeria to successfully host all data hitherto hosted abroad, in terms of their hosting capacity, should the directive be fully implemented? Today Nigeria has a lot of data centre providers, and data centres are rapidly increasing, which is good. Lagos is now pretty much the digital infrastructure hub for West Africa, and it’s continuing to be a major African hub as we’re building in more data centre capacities. Open Access Data Centres (OADC) is expanding significantly. We’ve had 24 megawatts and we are working towards 40 megawatts with Artificial Intelligence (AI). Equinix has talked about its own expansion of data centre in Nigeria. There is Digital Reality that has put in a lot of infrastructure in its data centres, and we also have Rack Centre on the mainland. So, not only do we have increasing scale, we also have multiple providers of data centre facilities that can conveniently host data in Nigeria. Some banks were beginning to see reasons why they should outsource their data to co-location data centres, and such banks are already connected to network providers, interconnection points, and internet exchanges, thereby diminishing the desires of banks to own data centres, to enable them face their core baking operations. Within OADC, we are open access and we are carrier neutral. We have over 45 carriers connected now. It’s a place to get into and interconnect. There’s a product that we have, which is a platform that has a peering engine in place now live in Nigeria. It is such that banks, oil and gas companies that use cloud services abroad can link to the platform. OADC is part of WIOC group.There’s a WIOC connectivity that has significant subsea capacity, and network capacity. We’re building out connectivity, long distance connectivity in the country, very progressive, and very successful. It gives operators efficient connection to the cloud location. WIOC connectivity is also a consortium partner to Google Equinox, and to Meta on its Two Africa cable, which lands in a different facility. Google’s Equinox lands into our own facility in Lagos. All these demonstrate the capacity and capability of the OADC data centres. What has been the compliance level since the directive was given, and has the directive in anyway increased OADC’s customer base? We cannot talk of compliance level until after January 1, 2027, which is the deadline for the implementation of the directive. In answering your question about the impact of the directive on OADC’s customer base, I will say we are beginning to see such impact, because more fintech companies and financial institutions are already discussing with us on data hosting in our facilities. I can’t be more specific, but I can say that we’ve seen a step in that direction, where more companies are beginning to seek interest in our co-location cloud services. Yes, we have seen that impact. One major concern of Fintech companies operating in Nigeria is the fear of losing their entire data to rising insecurity in the country. How will OADC assure customers of safety of data in its facility? Those that handle data should rather feel that their data domiciled in the country, which they operate is safe. The existing data centres in Nigeria comply with the strongest and the most stringent international standards on physical security and the construction certifications. OADC for instance, has certifications for ISO 2791, the 1001 Uptime certification. We’ve got PCIDSS certification for financial institutions. So it’s a world-class environment. That concern of fear raised by Fintechs, in my view, is a very weak argument. The set of standards we have in Nigeria are global standards. They’re not just backroom server rooms. And in fact, they should put in the systems that protect their own data. And whether you’re hosted in Lagos, Nigeria or hosted in Frankfurt, Germany you have to ensure that you’ve got the right application architecture that protect your data. And the performance is improving significantly in Nigeria because you’re actually hosted closer to your user base. OADC has a track record of 100 per cent uptime. We have an interconnect ecosystem that has over 45 carriers and growing. We have multiple connectivity to all of the subsea cable systems. As a member of the WIOC family, OADC has a point of presence in all key data centers. We directly have capacity that connects into many subsea cable systems. What more resilience would anybody want by world class standards? And we carry local and international capacity. The fear of downtime in business as a result of unstable power supply, is another concern of data operators. What is OADC doing to boost power architecture in its facilities? We have invested in very direct connectivity to the utility provider in Lekki, Lagos. But as we’re building up power, we also have our plan on how we’re able to link to the gas pipelines.There is a gas pipeline going from west to east. There’s another gas pipeline coming east to west that brings resilience and this will help us to build out our power capacity on site that’s driven to up to 50 megawatts. So, this is in our expansion plan, and we will continue to build out expansions to meet all of the required local and international cloud requirements. We are also looking at cloud banking that could be very sensitive to downtime. So, you now have good, and strong cloud share service capabilities that will enable banks to run their core banking in the cloud.We have sufficient gas in Nigeria. So, you will start to see more data centre capacity going to where the gas is available, or where you also have adjacent power plants where connectivity is available. There are three things that determine the digital infrastructure framework: power, data center, and connectivity. So that debunks any doubt in terms of the ability to scale up for electricity. What will be your advice for banks as they carry out the migration process of data localisation, in terms of planning and urgency? I will advise banks torespond very quickly in assessing the data that they have locally and internationally. They should also look at the capacity and capability of where they want to migrate to and to do that effectively, and then come up with the implementation plan. Banks should not see the directive from CBN as an impossible task. They should start off by architecting the solution and the roadmap to achieving it quickly. If there are any hiccups in that process, they can present it and demonstrate how they will manage the risk. Banks must be active and not passive in carrying out the CBN’s directive on data localisation. Another advice is for the banks to spread their data to different data centres, since we have multiple data centres and multiple cloud providers. They should also begin the investigation of how the data centre services will be provided to meet bank’s migration plans. Data centre operation is highly concentrated in Lagos, especially on the Island corridors of Lagos. Why is it so and what is the possibility of extending such facility to other Nigerian cities? It is not unusual to have data center clusters. Even in developed countries of the world, clusters of data centres exist. The clusters are largely driven by power location. Most data centres are located close to gas pipelines and other electricity generating power plant. However, in Lagos, we still have Rack Centre that is located in the mainland in Ikeja.If you look at the UK, you have a bit of a data center cluster, plus other parts of East London. So, it’s not unusual to have that. However, in Nigeria, OADC is seriously looking at having other locations in Port Harcourt and Abuja. There’s something else that the government has been doing with Project Bridge to drive 90,000 kilometers of fibre, which brings more access to compute to people. So, it will naturally see us have data centres growing and expanding to other locations in Nigeria. How ready is the data centre environment in Nigeria to accommodate hyperscalers and cloud computing? We have data centres in Nigeria that are designed to accommodate hyperscalers and cloud computing. OADC for instance, has space that is targeted and optimised for requirements of enterprises and hyperscalers and cloud and AI actually.And that’s what we’ve engineered to scale out into the build out that we have. We are absolutely able to deliver the compute density. We’re seeing increases in densities quite remarkably. And we’re now onboarding some workloads that have that increasing high density, but our 40 Megawatt build out is really top end world class. So, we’re now having different providers that are building out hyperscaler capability to enable those local zones to have the resilience that they would like to architect, because content providers, and not just the hyperscalers, have big content companies as well. They’ve been quietly coming into the Lagos ecosystem. A lot of these fundamentals have been put in place in different data centers as readiness to build out that hyperscale. So OADC is ready for hyperscale at world class. If someone places a call now to say, can you give me some workload, please? I’ll say thank you very much. How quickly would you like to come in? So, it’s not how quickly we can move, but how quickly they can move and we’re ready for that. We’ll onboard them as quick as they want to. What assurances do data centre operators have for the public, in line with CBN’s directive on data localisation? So, just to crown it all, I think one thing is clearly the reassurance that the general public should be proud of the world-class infrastructure that we have been developing in the country. Today, we’re well on track with not just Lagos that is already the digital hub in West Africa, but with other cities where data centres are springing up. Data centre growth in Nigeria is quite remarkable. Earlier this year, Nigeria reached the two terabits of data milestone. Two months ago, we exceeded that number are the country is close to achieving three terabits. That’s a significant growth and a trajectory going towards South Africa’s growth in internet exchange. So, the message to the public is, be proud of the data centre capacities that we’re growing, and be rest assured that we’ve got world-class data infrastructure in Nigeria. The development is driving Lagos as a significant location for digital hub in Africa.