Nigeria’s growing artificial intelligence (AI) activity is increasing the need for domestic computing infrastructure, as the World Bank warns that African economies’ reliance on foreign cloud services could expose them to higher costs, operational disruptions and data governance risks.
The bank identified Nigeria, Kenya and South Africa as the main centres of AI activity in sub-Saharan Africa, accounting for much of the region’s innovation, venture capital investment, research output and advanced applications.
However, it warned that limited computing infrastructure and dependence on externally hosted cloud services could prevent African countries from fully capturing the economic benefits of artificial intelligence.
In its October 2026 Africa Economic Update, titled Building AI Readiness, the World Bank said reliance on foreign cloud providers raises concerns about the cost of accessing computing resources, the resilience of digital operations and the ability of governments and businesses to maintain control over their data.
The concerns come as Nigeria steps up efforts to expand its domestic data storage and processing capacity, with regulators and policymakers seeking to reduce dependence on digital infrastructure located outside the country.
One of the most immediate developments is the Central Bank of Nigeria’s (CBN) directive requiring financial institutions and other licensed payment system participants to store and manage payment transaction data generated in Nigeria on servers located within the country from January 1, 2027.
The requirement covers banks, mobile money operators, switching and processing companies, payment service providers and other licensed participants in the payments ecosystem.
It forms part of a broader government push to strengthen domestic control over critical digital infrastructure through the National Information Technology Development Agency’s (NITDA) National Sovereign Cloud Initiative and the Federal Government’s National Digital Cloud Policy.
However, the transition to local hosting could prove more complicated than the availability of domestic infrastructure, with a recent NITDA survey indicating that several financial institutions have yet to complete the preparations required ahead of the January deadline.
Muhammad Lawal, special assistant on policy to the NITDA director-general, said 26 of the 44 financial institutions that responded to the readiness question had either completed or were likely to complete the required actions before January 1. Another 15 considered completion unlikely or very unlikely, while three institutions were unable to assess their readiness.
The survey further found that 22 of the 44 institutions had yet to begin implementation, with budget approvals, negotiations with service providers and system migration among the outstanding tasks.
Although 79 per cent of digital infrastructure providers surveyed said they were ready to accommodate additional workloads from financial institutions, Lawal said the challenge extended beyond infrastructure availability to the process of deploying services and migrating existing systems.
The findings highlight a potential gap between Nigeria’s ambition to expand local cloud capacity and the ability of financial institutions to migrate their operations within the regulatory timeline. Securing funding, negotiating service agreements and reconfiguring existing systems could complicate the transition even where local hosting facilities are available.
Beyond regulatory compliance, the push for domestic cloud infrastructure also carries economic implications for Nigeria, which has continued to rely on foreign providers for a substantial portion of its data storage and processing needs.
Ike Nnamani, chairman of the Technical Working Group of the National Sovereign Cloud Initiative, had previously said Nigeria spends billions of dollars hosting its data abroad, arguing that expanding domestic infrastructure could reduce capital outflows and stimulate investment in local cloud services and data centres.
He said retaining more data hosting activities within the country could also create employment opportunities, attract foreign investment and improve the performance of digital services that depend on access to locally hosted information.
The economic cost of foreign dependence was also highlighted in a recent study commissioned by Luminate and conducted by the Global Centre on AI Governance, which estimated that Nigeria loses about $850 million annually through its reliance on cloud services provided by foreign companies.
The issue is particularly relevant to Nigeria’s AI ambitions, as businesses and technology developers increasingly require computing resources to store large volumes of data, train AI models and deploy applications.
The World Bank noted that inadequate computing infrastructure remains a major constraint across sub-Saharan Africa, alongside unreliable electricity supply, limited internet access, expensive devices and shortages of AI-related skills.
It also warned that fragmented local data ecosystems and the inadequate representation of African languages in digital datasets could undermine the relevance and reliability of AI applications developed for the region.
