Economic Update

With local companies starting to buy into the concept of farming out some technology-based activities, Nigeria’s business process outsourcing (BPO) sector is gaining wider acceptance in the domestic market. However, expanding onto the global stage will require countering perceptions of weak regulation and poor security.

The potential for BPO services in Nigeria is strong and growing, according to the National Information Technology Development Agency (NITDA), a clearing house for IT projects in the public sector. In particular, the country is well-placed to provide BPO services to companies across Africa, thanks to its language, location and skills base, Ashiru Daura, NITDA’s acting director-general, told local industry magazine Biztech Africa in mid-August.

The market could be substantial, he added. “BPO can contribute billions of naira to the growth of the economy. India makes more money from BPO than what Nigeria makes in oil,” he said.

Overcoming obstacles

While NITDA has identified BPO as having the potential to expand, it has also acknowledged there are obstacles to this growth, including uneven supply of electricity and internet services. Nigeria’s poor image abroad, in particular regarding cybercrime and online fraud, is an issue to be addressed.

Stronger policy direction from the government could help, according to Abiodun Adeoye, managing director and CEO of Lagos-based outsourcing service provider Contact Solutions (ConSol). A more robust local content policy as well as promotion of the industry by the government would counter negative sentiment towards Nigerian BPOs, Adeoye said.

“The government can strengthen industry regulations, which would go a long way in building confidence among potential offshore clients, who may be wary of outsourcing to a newer BPO market like Nigeria,” he told OBG in an interview in mid-September.

State slow to take advantage of outsourcing

Though there is increasing awareness among Nigerian companies of the advantages of outsourcing, the state is still reluctant to avail itself of BPO services, private sector experts say. According to Niyi Yusuf, country managing director for management consultancy, technology services and outsourcing firm Accenture Nigeria, contracts with state agencies offer growth potential for the sector. However, there are few openings on offer, as the government has its own Galaxy Backbone platform that provides shared data facilities to all ministries and agencies.

“From our understanding, government departments are actively encouraged and, in certain instances, mandated, to use the Galaxy Backbone, thereby precluding them from directly patronising private sector BPO centres,” Yusuf told OBG. “This might be due to data privacy and security issues, but it shouldn’t be a barrier, as governments all over the world outsource BPO.”

ConSol’s Adeoye agrees, saying the public sector represents a strong opportunity for BPO.

“Much of the recordkeeping is still done on paper. Digitising these government records is just one example of where government – at the state or federal level – could benefit from BPO,” he said.

While outsourcing by public institutions is not yet widespread, exceptions include the Lagos state government, which in 2008 commissioned the country’s first emergency contact centre, built and operated by a local services provider, ConSol. In 2012, the onshore Lagos State emergency contact centre fielded 50m calls for public safety incidents ranging from fire to building collapse, robbery and riots.

Opportunities in the private sector

Multinationals operating in Nigeria have tended to offshore their BPO although this is changing, particularly in industries such as fast-moving consumer goods. In recent years, British American Tobacco and Proctor & Gamble having also used Consol, for example, for customer service-related activities, including feedback and enquiries.

Other potential clients include banks, both local and international. Winning customers in the financial services sector has been slower due mainly to a perception that Nigerian firms do not have adequate data security systems in place. However, this is more of a misunderstanding than reality, according to Adeoye. “There is enough technology available in Nigeria today to protect information at multiple levels,” he told OBG.

Addressing any lingering security concerns, as well as educating the market regarding the broader benefits of outsourcing – such as cost savings and efficiency gains to be gained by allowing businesses to concentrate on their core functions – would go a long way towards boosting the market and setting the stage for further growth in the BPO sector.