Nigeria: Internet expansion

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The Nigerian government has launched a series of initiatives to bolster its information and communications technology (ICT) sector. These efforts take the form of major investment programmes and partnerships to help the sector address some of the challenges that have been stifling its growth.

Omobola Johnson, the minister of communications technology, announced in May that the federal government plans to build a national backbone for the telecoms and ICT sector to address the country’s low internet penetration and high broadband costs.

“Despite the fact that we have internet penetration of 28%, which is about 45m users, only 9%, which is about 14.5m users, are actually internet subscribers, and broadband penetration is a mere 6%,” he said. “Even though access to broadband using mobile phones is increasing, which amounts to an increase in the number of subscribers, what the statistics tell us is that most Nigerians still access the internet through public venues, such as offices, internet cafes, computer labs, and others.”

To address deficiencies in ICT infrastructure, the federal government will develop more internet exchange points (IXPs). IXPs interconnect internet service providers (ISPs) in a region or country without having to route messages across multiple international data centres to reach their destinations. IXPs help reduce the cost of internet traffic and allow for more applications to be used. Two IXPs have already been established, the first in Abuja and the second in Port Harcourt, and others are currently being developed.

The arrival of landed gateway cables into Nigeria may also contribute to improving ICT infrastructure and bridging the digital gap. The West African Cable System (WACS), a 14,000-km fibre-optic submarine cable with a capacity of 5.12 terabytes per second (TBps), will begin service this year. WACS will join Glo-1, a 10,000-km undersea cable launched last year, in providing high-speed internet and other telecoms services to the West African country. Altogether, there are five undersea cable systems connecting Nigeria to Europe and the US, and they are expected to boost data capacity to over 12 TBps.

The country is also looking to deepen ICT activity beyond simple issues of connectivity by encouraging investment and expenditure in local production and development. New regulations currently pending before parliament that could be implemented in third-quarter 2012 would mandate the purchase of local IT products and services when they are available.

According to Cleopas Angaye, the director-general of the National IT Development Agency (NITDA), once the guidelines are issued, the procurement of non-Nigerian-manufactured computers and IT products by ministries, government departments and agencies − where certified local brands exist – would be deemed an offence.

According to Harold Anumihe, the CEO of local IT firm Brighthouse Technologies, “Mandating the purchase of local IT products and services is a double-edged sword. Whereas it would positively impact on development of local industries and capacity, the countries of origin (particularly the US) of the foreign original equipment manufacturers such as HP, Dell and IBM may see this as diplomatically offensive, and it may have repercussions on their dealings with Nigeria in the technology space. It's a very delicate trade-off that should be handled carefully.”

The extent to which the guidelines, when issued, could make a difference for local hardware manufacturing firms and software development firms is uncertain, given the limited number of local manufacturers and developers who are able to meet the demands of government tenders.

Anumihe echoed this concern, telling OBG, “Before such a policy would be implemented, we have to really scratch our heads on the timelines needed for full implementation as, in my opinion, local capacities to date could only fill up to 5% of total public sector demand.”

Nigeria’s telecoms and IT sector has massive growth potential, but it must overcome a number of key challenges before the sector can fulfil its potential. The single largest challenge is the lack of a reliable power supply but deficiencies in ICT infrastructure must continue to be addressed as well. In addition, the development industry faces challenges from erratic intellectual property enforcement. Software piracy remains prevalent in the country; according to a recent study, the commercial value of unlicensed software installed in 2011 reached $251m, representing an 82% rate of piracy, nearly double the global rate of 42%.

Still, with strong backing from its government and keen interest from major private sector players, the outlook for this West African country’s ICT sector looks good. As it continues to grow, there will be significant investment opportunities in the areas of infrastructural development, research and training, as well as cyber-security.

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