The surge in energy costs, particularly diesel, is straining the operations of data centers in Nigeria. This challenge threatens to impact other essential technology services, including internet consumption and cloud services.
Data centres are critical infrastructures for modern businesses and governments, providing secure and reliable digital data storage, processing, and management. Nigeria is home to over 11 data centres, with notable names like Rack Centre, Main One, and Open Access Data Centres (OADC). However, industry experts argue that this is insufficient, estimating a $600 million data center gap.
Ayotunde Coker, chief executive officer of OADC, recently stated, “We do not have enough data centres. Xalam Analytics shows that Africa has 1 percent of the global digital infrastructure while having 17 percent of the world’s population and 4 percent of the global GDP.”
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According to an Arizton Advisory and Intelligence report, Nigeria’s data centre market was valued at $230 million in 2022 and is expected to reach $415 million by 2028. Coker emphasised the urgent need for a tenfold increase in digital infrastructure to meet the country’s growing data demands.
“We must build numerous data centres to bring data storage and processing closer to Africa, driving consumption and transforming lives and businesses,” he added.
Data from the Nigerian Communication Commission (NCC) reveals that the average monthly internet consumption has soared by 502 percent since 2019, with usage increasing from 125,149.86 terabytes (TB) in December 2019 to 753,388.77 TB in March 2024. This surge has heightened the demand for data centers, leading companies like Airtel and MTN Nigeria to initiate new construction projects.
“With sufficient headroom, we can cater to growth and sudden demand rise, ensuring a seamless experience for our subscribers,” stated Mohammed Rufai, MTN’s chief technical officer, when announcing the telco’s new data center plan.
Innocent Itsukwi, general manager, Data Center Operations (West Africa), MainOne, an Equinix Company, stated: “Investments in data centres have been growing, but there’s room for more to meet the increasing demand—but that is not to say existing data centre capacity is sold out, and there is more in development.”
However, expanding this critical infrastructure is being threatened by rising energy costs. “Power is an issue globally, but the amount of power data centres require is immense,” said Chris Wood, CEO of West Indian Ocean Cable Company (WIOCC).
The high cost of energy is already jeopardising communications services. “The biggest constraint we have in the telecom industry is the high cost of energy,” said Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON).
According to the National Bureau of Statistics, the average cost of a litre of diesel rose by 73.63 percent year-on-year to N1379.48 in July 2024, while petrol prices increased by 28.35 percent to N770.54. Electricity tariffs have also spiked by over 200 percent after the government approved a tariff hike for Band A electricity users (customers who receive between 20 and 24 hours of electricity supply daily).
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Energy costs account for over 35 percent of operating expenses, and according to industry experts, diesel-powered electricity now costs over N500/kWh, up from N300/kWh in 2023.
An average full-scale data centre is 100,000 square feet and runs around 100,000 servers stored in racks. A rack can hold 21 or 42 servers. According to eHow.com, one server can use between 500 and 1,200 watts per hour. At an average of 850 watts per hour, this equates to 20.4 kilowatts (kWh) daily or 7,446 kWh annually per server.
“Considering various factors such as electricity tariff increases, diesel cost, inflation, PMS, and fluctuations in foreign exchange rates, the operational costs for running a data centre have risen by approximately 200 percent over the past year,” said Itsukwi of MainOne.
Itsukwi noted that these factors pose challenges for an industry that cannot afford downtimes. “Our existing data centres operate to high standards, with minimal downtime and solid reliability. However, economic instability… present challenges to maintaining and expanding these facilities,” the manager noted.
To mitigate these rising costs, operators are increasingly adopting a mix of energy sources—grid, gas, generators, and solar. Itsukwi emphasised the importance of implementing cost-effective measures, such as regularly maintaining and upgrading equipment to more energy-efficient models, identifying energy waste, and optimising operations by monitoring and reducing Power Usage Effectiveness (PUE).
“As the data centres grow, there needs to be a real focus on sustainability and a reduction in the impact on the environment and the grid itself,” Wood of WIOCC corroborated.
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However, industry operators warn that these measures may not be sufficient without government intervention. The telecom sector is facing its worst crisis in recent memory, and investments in digital infrastructure might slow down in 2024 due to mounting operational pressures. Data centers, whose critical role was underscored by a recent fiber cut incident that exposed how little internet content is localised in the country, are not exempt from these challenges.
Itsukwi of MainOne noted that data center operators have not received government concessions. “By addressing these issues, we (operators) can improve operational efficiency and attract more investments, ultimately reducing the risk of future disruptions,” he added.
