Local Data Hosting Directive Aims to Mitigate Exchange Rate Risks for Nigerian Financial Institutions
The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has welcomed the Central Bank of Nigeria’s (CBN) recent directive mandating the local hosting of payment transaction data. This initiative is expected to aid Nigerian banks and fintech companies in lessening the adverse effects of foreign exchange fluctuations.
In an interview with the News Agency of Nigeria, ALTON Chairman Gbenga Adebayo expressed his endorsement of the directive, highlighting its significance in today’s evolving financial landscape.
Strategic Advantages of Local Data Hosting
Adebayo emphasized that the benefits of local data hosting extend beyond mere cost efficiency. Hosting data domestically can significantly mitigate long-term operational risks for financial institutions. He pointed out that organizations maintaining their data on local servers can minimize exposure to currency volatility by conducting transactions in naira instead of foreign currencies.
By doing so, Adebayo argued, these organizations position themselves to better manage their financial operations and reduce overall costs. He firmly believes that local data hosting is a pivotal strategy for enhancing the financial sustainability of these entities.
National Data Sovereignty and Control
Adebayo further articulated that local data hosting is not just a financial maneuver but also a matter of national sovereignty. He advocated for Nigeria to take full ownership of its data value chain, including collection, management, and storage. According to him, outsourcing this responsibility to foreign jurisdictions is no longer an acceptable practice.
He urged that increased local hosting would not only benefit financial institutions but also bolster the nation’s overall digital security and data integrity.
Performance and Latency Considerations
Beyond financial and sovereignty concerns, Adebayo discussed the performance issues tied to overseas data hosting. He explained that each transaction routed to international servers incurs additional communication overhead, which can compromise response times and inflate data retrieval costs.
Adebayo noted that transactions requiring data housed outside Nigeria incur increased latency due to the distance the data must travel. This, he insisted, underscores the necessity for local data hosting solutions.
Addressing Infrastructure Readiness
Addressing apprehensions about Nigeria’s infrastructure capabilities, Adebayo highlighted the existing data center capacity that currently serves international clients. He pointed out that several Nigerian-owned data centers successfully host foreign data, raising the question: if these facilities can store data for international clients, why can’t they host Nigerian data as well?
No less than six Tier III data centers are operational in Nigeria, with further facilities under construction. Adebayo emphasized that the focus should be on the actual capacity of these centers as opposed to their numerical count, reinforcing that the market is well-prepared to implement this directive.
Compliance Timeline and Regulatory Framework
The CBN’s directive requires that all banks, fintech companies, mobile money operators, and other payment service providers store payment transaction data generated within Nigeria domestically. Issued on June 15, the circular—signed by Rakiya O. Yusuf, Director of the CBN’s Payment Systems Supervision Department—sets a compliance deadline of January 1, 2027.
