Nigerian banks have long patronised foreign technology companies like IBM, Microsoft, and the like for their hardware and cloud hosting needs. This in itself is an indictment on the nation and the continent as a whole over the absence of homegrown solutions that can readily offer technological solutions on an enterprise level. Interestingly, there are actually home-grown companies, and even though a number of local companies are bracing up, patronage from government and private institutions is still very low. According to a 2021 report, more than 70 percent of government ministries, departments, and agencies (MDAs) still host their data on foreign providers Microsoft Azure and AWS.
A development that is becoming more worrisome is the growing trend among banks to further outsource their hardware and data storage needs to China’s Huawei. This is all in a bid to save on cost. With this development, Huawei is gradually making an inroad into the Nigerian banking sector and aiming to take a good chunk of the technology infrastructure market.
According to reports, the company recently clinched a deal with the United Bank of Africa (UBA), a tier-1 commercial bank with a market capitalisation of N803 billion, to provide a data storage solution following an increase in the cost to maintain the service of its previous provider. According to the report, Huawei sold 200 petabytes of storage and cloud solutions to the United Bank of Africa in a deal within the region of $3 billion. The company has also cut deals with Fidelity Bank, First Bank, and Opay.
While UBA had in the past used IBM’s storage and VMWare for its virtualised technology components, the 2022 acquisition of VMWare by Broadcom brought about a significant change as VMWare subsequently switched to a subscription-based model, thereby causing a huge spike in licensing costs. This led to the bank’s using the company to look around for cheaper alternatives.
Now Huawei, and by extension, Chinese companies, have always been known for their bullish strategy to penetrate every market they set their eyes on, and that is what appears to be happening at the moment as the company’s clientele among Nigerian banks swells.
This gradual inroad, even though it cuts back operational costs for these banks, is a development that should be a cause of concern to stakeholders, and that is because it raises issues around the nation’s national security. Nigerian banks’ reliance on Huawei’s technological hardware raises a number of significant risks—economic, political, and even cybersecurity-wise.
National Security and Cyber Risks
Huawei’s close ties to the Chinese government have raised alarms in many parts of the world, especially in the West. Several countries, including the United States, the United Kingdom, and Australia, have either banned or limited Huawei’s involvement in their critical infrastructure due to fears of espionage and cyber espionage. Financial institutions are especially susceptible to cyber threats given the fact that in their digital storage lie the financial data of millions of customers.
Nigerian banks, by integrating Huawei technology into their core operations, could be opening the door to future cybersecurity risks. Although there is no concrete evidence that Huawei has engaged in malicious activities on behalf of the Chinese government, the possibility cannot be dismissed. Nigeria, being one of Africa’s largest economies, holds significant geopolitical value. Any cyber compromise involving Nigerian financial institutions could have dire consequences, not only for the financial sector but for national security as a whole.
Erosion of Local Tech Development
The continued reliance on foreign tech companies like Huawei does more harm than good to the development of the local tech ecosystem. A critical sector such as the banking sector should be incentivising the local market by patronage, as this will not only encourage local companies but ensure that jobs are created and foster local technological innovation.
It should be stressed also that local companies will most certainly understand the terrain better and are in a better position to drive growth and excellence.
These local players have the potential to drive indigenous solutions that address unique African problems, such as financial inclusion for the unbanked and digital payment solutions tailored to Nigeria’s informal economy.
However, the romance with Huawei could stunt the growth of these domestic innovators. By choosing to outsource critical tech needs to a foreign company, Nigerian banks may inadvertently sideline local talent and ideas. Over time, this could lead to an over-reliance on foreign technology, reducing Nigeria’s self-sufficiency in digital innovation.
Economic dependency and sovereignty concerns
China’s growing influence in Africa has raised concerns about neocolonism, with many African nations heavily indebted to Chinese loans and reliant on Chinese infrastructure projects. The deeper Nigerian banks delve into partnerships with Huawei, the more Nigeria risks becoming economically dependent on Chinese technology. It might not be entirely obvious now, but sooner than later this will build up and translate to a total dependence on China.
As Huawei becomes more entrenched in Nigeria’s financial systems, any disruption in diplomatic relations or economic tensions with China could have a ripple effect on the country’s banking sector. Nigeria, like other African nations, needs to guard against becoming overly dependent on any single foreign power, especially in areas as critical as finance and technology.
Lack of transparency and accountability
One of the most worrisome areas eliciting significant concerns is the opacity of Huawei operations. There have been several accusations of intellectual property theft, forced partnerships, and concerns about Huawei’s adherence to global data protection laws. By aligning with Huawei, Nigerian banks are exposing themselves to a company that has faced numerous ethical and legal challenges globally.
Again, it is worthy of note that Nigeria has limited mechanisms to hold foreign tech companies accountable should there be any lapses in service delivery or data breaches. This lack of transparency could be a ticking time bomb for Nigerian banks, especially in an industry where trust and accountability are essential components.
Conclusion
While the partnership between Nigerian banks and Huawei does seem like a cost-effective and technologically advanced solution in the short term, the long-term risks are too significant to ignore. Nigerian banks should reconsider their growing romance and dependence on Huawei and explore alternatives. Homegrown solutions Priority should be given to issues such as cybersecurity, local innovation, and Nigeria’s digital sovereignty. Fostering partnerships with local tech companies and diversifying technological dependencies is a better way to go in positioning Nigeria for future growth while safeguarding national interests. The romance with Huawei might feel right today, but ultimately, it could lead to unintended consequences tomorrow.
