Data center operators in Nigeria are facing significant challenges due to the ongoing foreign exchange (forex) crisis, which is now jeopardizing the substantial investments already made in the construction and operation of these facilities.
Industry experts have expressed deep concerns about the increasing difficulty in securing additional financing, as operators struggle to generate sufficient returns amidst the growing exchange rate volatility.
This forex instability is compounded by the reluctance of Nigerian banks to support long-term investments in the data center industry.
Banks in the country have shown limited interest in financing ventures that require extended periods to yield returns, forcing data center operators to rely heavily on foreign investors for funding. The lack of local financial backing presents a major obstacle to the growth and sustainability of the industry.
The situation has created a cycle of uncertainty, as potential investors are becoming more hesitant to commit additional capital due to concerns over profitability and the risks associated with currency fluctuations.
READ ALSO:
Nigeria’s SEC Set to Crack Down on Unregulated Cryptocurrency Exchanges
With limited support from local financial institutions, data center operators are left in a precarious position, struggling to navigate the complex economic landscape while trying to attract international investment to sustain and expand their operations.
This combination of factors—forex instability, limited local financial support, and the increasing wariness of foreign investors—poses a serious threat to the growth of Nigeria’s data center industry, which has already seen millions of dollars invested.
Without swift action to stabilize the exchange rate and encourage more favorable banking policies, the future of this critical sector may be in jeopardy.
Amid various challenges like power supply and infrastructure, data center operators in Nigeria now cite currency instability as their biggest issue. Engr. Ikechukwu Nnamani, CEO of Digital Reality Nigeria, highlighted that around 90% of the investment needed to build a data center is in foreign currency, as most essential equipment must be imported.
The Managing Director of MainOne, parent company of MDXi, stated that Naira fluctuations have driven up operational expenses due to increased costs of service contracts with OEMs and third-party vendors, affecting profitability. Engr. Ikechukwu Nnamani added that data center operators must adjust their pricing to the Naira’s movement, but foreign funding remains essential, as local banks seek quick returns.