- The CBN's push for local data storage may strengthen Nigeria's digital sovereignty, but it also exposes the country's long-standing electricity deficit
- Data centres require massive, uninterrupted power supplies, forcing banks and fintechs to choose between costly diesel generation, expensive renewable energy investments, or complex hybrid solutions
- Without reliable and affordable electricity, the financial burden of complying with data localisation rules could erode profitability, discourage innovation, and undermine the policy's intended benefits
The Central Bank of Nigeria (CBN) has thrown down a significant challenge to banks, fintechs, and other payment service providers. In a recent directive, the apex bank ordered all payment transaction data generated within Nigeria to be stored and managed within the country by January 1, 2027. The move is aimed at strengthening regulatory oversight, improving data security, and reducing dependence on foreign infrastructure.
On paper, the policy makes perfect sense.
Around the world, countries are increasingly embracing data localisation. Governments want greater control over sensitive financial information, faster regulatory access, stronger cybersecurity protections, and reduced exposure to foreign jurisdictions. For a country whose digital payments ecosystem processes trillions of naira annually, keeping critical financial data within national borders appears both logical and strategic.
Yet beneath the laudable objective lies a familiar Nigerian problem: electricity.
Data centres are among the most power-hungry facilities in the modern economy. Unlike office buildings, factories, or retail outlets, they cannot afford downtime. Servers must run around the clock. Cooling systems must operate continuously. Backup systems must be permanently available. Every second of interruption risks service failures, transaction disruptions, and significant financial losses.
In countries with stable power infrastructure, this requirement is hardly controversial. In Nigeria, however, it raises uncomfortable questions.
How exactly will banks and technology companies power the data infrastructure that this directive demands?
The most immediate answer is diesel. For years, businesses across Nigeria have relied on generators to compensate for unreliable public power. But diesel is expensive, vulnerable to price fluctuations, and increasingly difficult to justify in an era when companies are under pressure to reduce carbon emissions. Running a large-scale data centre substantially on diesel can turn energy from a manageable operating expense into one of the largest cost centres on the balance sheet.
Solar energy is often presented as the alternative. Nigeria certainly has abundant sunlight. However, powering a modern data centre is not as simple as placing solar panels on a rooftop. Data centres require uninterrupted electricity 24 hours a day, including during the night and cloudy periods. This means solar installations must be paired with extensive battery storage systems or other backup sources. Such infrastructure is technically feasible but extremely expensive at scale.
The result is that organisations are forced into a difficult equation. They can invest heavily in alternative energy systems, maintain costly diesel backup arrangements, or combine multiple power sources in complex hybrid models. None of these options comes cheaply.
This matters because data localisation is not merely a regulatory exercise; it is also an economic one.
Banks and fintechs will have to absorb substantial infrastructure costs, whether through building their own facilities or leasing capacity from domestic data centre operators. Those costs inevitably affect profitability. In a sector already grappling with inflation, foreign exchange volatility, cybersecurity investments, and rising operational expenses, energy-intensive compliance requirements add another layer of financial pressure.
How a data centre looks like from the inside
There is also the question of competitiveness.
Large banks may be able to fund these investments without significant strain. Smaller financial institutions and emerging fintechs may not be so fortunate. The danger is that compliance costs become a barrier to innovation, favouring well-capitalised players while making it harder for newer entrants to compete.
None of this is an argument against the CBN's directive. Data sovereignty is increasingly becoming a strategic necessity rather than a luxury. Countries that fail to develop local digital infrastructure risk surrendering control over critical aspects of their economies.
But policymakers must recognise that data sovereignty cannot be separated from energy sovereignty.
A nation that wants locally hosted financial data must also ensure reliable and affordable electricity for the facilities that host that data. Otherwise, the gains from localisation may be undermined by soaring operational costs and reduced competitiveness.
The CBN has provided a deadline. The market will find ways to comply. The real question is whether Nigeria's power sector can keep up.
Because in the digital economy, data may be the new oil. But without electricity, it remains trapped underground.
age innovation, and undermine the policy's intended benefits.
Nigeria’s AI potential underestimated due to infrastructure gaps
Previously, TheRadar reported that a Nigerian entrepreneur and technology expert, Elizabeth Jack-Rich, said artificial intelligence (AI) remained undervalued across Nigeria and the wider African continent due to a narrow understanding of what truly drives the technology.
Speaking at an AI-focused event in Washington, D.C., Jack-Rich argued that discussions around AI had been centred on software innovation, while ignoring the fundamental role of physical infrastructure and resource supply.