Over 90% of Nigerian banks, fintechs face foreign cloud exit as CBN forces data home by 2027

Nigeria’s banks, fintech companies and payment providers face one of the biggest technology migrations in the country’s financial history after the Central Bank of Nigeria (CBN) ordered all payment transaction data generated within the country to be stored and managed locally by January 1, 2027.

The directive effectively ends years of dependence on foreign cloud infrastructure for critical payment operations and is expected to trigger a rush toward local data centres, cloud platforms and digital infrastructure investments.

Industry estimates suggest that more than 90 percent of regulated businesses and organisations in Nigeria currently host data on foreign cloud platforms such as Amazon Web Services (AWS), Google Cloud and Microsoft Azure.

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The new regulation means banks, fintech firms, payment processors and other financial institutions must bring payment transaction data back home within the next six months or risk falling foul of regulatory requirements.

The move is widely seen as one of the most significant interventions in Nigeria’s digital finance sector in recent years, with implications for cybersecurity, national sovereignty, cloud computing, data centre investments and foreign exchange outflows.

“This is a step in the right direction. We have been asking for this for many years,” Ikechukwu Nnamani, chief executive officer of Digital Realty Nigeria told BusinessDay.

According to Nnamani, the benefits go beyond compliance.

“The reasons why this is important are many. You are talking of security, national security and the implications of that. You are talking of the quality of service. We are also talking of capital flight and capital development because if these things are localised, Nigerians will work and be the ones to manage them locally, so you create employment.”

The CBN’s directive comes as Nigeria continues to experience explosive growth in digital payments, mobile banking and fintech services. The country has emerged as one of Africa’s largest digital payments markets, processing trillions of naira in electronic transactions annually.

For years, many financial institutions relied on foreign cloud providers because of their global scale, reliability, built-in redundancy and advanced infrastructure. While regulators had previously encouraged local data storage through data protection and cybersecurity frameworks, the latest circular introduces a hard compliance deadline that turns policy aspirations into a regulatory requirement.

Temitope Osunrinde, executive director of Africa Hyperscalers, said the directive provides one of the strongest signals yet for investment in Nigeria’s digital infrastructure sector.

“The CBN’s directive is significant because it moves data localisation from a policy aspiration to a regulatory requirement with a clear implementation timeline. For Nigeria’s digital infrastructure sector, this creates one of the strongest demand signals yet for local data centres, cloud platforms and interconnection services,” Osunrinde told BusinessDay.

He said financial institutions and fintech companies represent some of the country’s fastest-growing digital workloads and that requiring those services to remain within Nigeria would increase demand for domestic hosting capacity and strengthen the business case for new infrastructure investments.

“As more regulated workloads move onshore, operators will be incentivised to expand capacity, improve resilience and invest in higher standards of power reliability, cybersecurity, disaster recovery and operational performance,” he said.

The transition, however, is expected to be challenging.

Many banks and fintech firms have built their systems around global cloud providers. Migrating critical applications and data to local infrastructure could require substantial investments, operational adjustments and technical redesigns.

Moyo Oluwatuyi, a communications and fintech analyst, believes the migration will not be straightforward.

“Quite a number of banks, fintechs and financial institutions rely on AWS and other foreign cloud services because they’re reliable. It’s not just about storing data. There are loads of redundancies and other things that these cloud storage platforms cover that local alternatives probably don’t have,” he said.

Oluwatuyi said questions remain about whether local operators can consistently match the reliability offered by global cloud providers, especially in a country where electricity supply remains a major challenge.

“Are there data centres that are truly reliable in Nigeria with the inconsistent power supply?” he asked.

Despite those concerns, industry executives insist Nigeria already has sufficient capacity to support banking and fintech workloads.

The country currently hosts more than 21 colocation and enterprise data centres, including facilities operated by Rack Centre, Equinix’s MDXi and Africa Data Centres.

Nnamani said banking and fintech applications do not require the same power-intensive infrastructure needed for artificial intelligence workloads.

“In the data centre space, the kind of services that support fintech and banking applications fall under what we call colocation. There exist in the country today data centres that can take this kind of services and are taking it already,” he said.

He added that the real value of the CBN policy is that it gives investors confidence that future demand will justify new infrastructure spending.

“It will actually unlock a lot of the bottlenecks that have existed before now. People are not willing to do those investments if they’re not 100 per cent sure that there’s a business that will come post-investment to justify the funding that will be put in,” Nnamani said.

The economic implications could be substantial.

Industry estimates suggest Nigeria spends more than $1.1 billion annually on public cloud services. Analysts believe localising payment data could help retain as much as $850 million each year that currently flows to foreign cloud providers and offshore hosting facilities.

Keeping those expenditures within Nigeria could reduce pressure on foreign exchange reserves, lower international bandwidth costs and stimulate growth in the domestic data centre market, which is projected to approach $1.9 billion by 2031.

The shift could also improve service quality. Local hosting typically reduces latency, enabling faster transaction processing and improved customer experiences for digital banking and fintech services.

Power remains one of the biggest questions surrounding the transition.

Nnamani argues that data centre operators should not become electricity producers simply to keep facilities running.

“I have always said that a data centre operator should not be a power company,” he said.

Instead, he believes Nigeria’s growing market for independent power producers (IPPs) offers a more sustainable solution, adding that, “We need more independent power producers to come online. Most of them are depending on renewable energy sources, either hydro, either solar, or gas, which is much better than diesel.”

According to him, increasing power generation rather than merely redistributing existing electricity supplies is the long-term answer.

“The whole idea of independent power producers is more power is generated. What Nigeria generates today is peanuts compared to what it should be,” he said.

Beyond data localisation, the CBN’s circular introduced other reforms aimed at strengthening oversight of the financial sector.

The regulator now requires financial institutions and payment operators to disclose their ultimate beneficial owners and maintain updated ownership records for regulatory review.

The circular also imposes market concentration limits designed to prevent excessive dominance in card issuing and merchant acquiring businesses.

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For many industry observers, however, the data localisation requirement remains the most consequential aspect of the package.

Osunrinde believes the policy could become a model for other African countries pursuing digital sovereignty and local cloud development.

“Nigeria’s move is likely to be closely watched by regulators and policymakers across Africa. In many respects, data localisation is not just a regulatory tool; it is increasingly becoming a national infrastructure development strategy,” he said.

With less than one year before implementation begins, Nigerian banks, fintech companies and payment operators now face a race against time.

Institutions that delayed localisation plans may face the most difficult adjustments, while those that invested early in local infrastructure could gain a competitive advantage.

The success or failure of the migration will not only determine compliance with CBN rules but could also shape the future resilience, competitiveness and sovereignty of Nigeria’s rapidly growing digital economy.