E-Business
How Hosting Locally Reduces the Impact of Foreign Exchange Fluctuation
When organizations want to host their content, they look for a hosting platform that gives them efficient, high speed, and cost-effective service, so their content can be accessed quickly.
But while businesses and agencies in Nigeria have this same expectation, many unwittingly opt for service providers that cost them this speed and cost-effectiveness they crave. They host their data with foreign data centers.
Several consequences follow from hosting with foreign service providers. Upload and download times could be slower because the data centers are far away from the business that stores and accesses the data. There are data sovereignty issues as well; it’s not always clear whether it’s the business’s home country or the data center’s host country that has administrative rights over the data.
There’s another problem that businesses get exposed to when they use foreign hosting platforms. It’s a problem with unstable currency exchange rates.
The Exchange Rate Problem
Organizations also have to pay for the hosting services provided from beyond their borders in foreign currency. If a company in Nigeria hosts its content with a cloud firm in the United States, it will pay that firm for its services in dollars.
According to the Nigeria Internet Registration Association (NiRA), the country loses up to ₦60 billion worth of foreign exchange to other countries every year as payments for web hosting services. As of 2016, less than 2% of domain names were registered in Nigeria.
There’s a problem with this. If most establishments with a web presence in Nigeria rely on foreign hosting, they will be exposed to fluctuations in foreign exchange. If the dollar becomes more expensive relative to the naira, they will have to spend more to pay hosting fees.
Let’s explain this with a simple example.
Suppose Company A in Nigeria hosts its website with a hosting firm B in the United States. The Nigerian company A pays the hosting firm B $700 annually for its hosting services.
If the current dollar-naira exchange rate is ₦360 to $1, the Nigerian company will be spending an equivalent of ₦252,000 on hosting in one year.
But if the naira slumps and the exchange rate becomes ₦400 to $1, the Nigerian firm will have to pay ₦280,000 in hosting fees in a year.
That’s a difference of ₦28,000.
How a Fluctuating Exchange Rate Affects Business Hosting Budgets
One thing becomes immediately apparent: companies can’t be sure how much they will have to pay for hosting when they are drawing up their budgets. Even if the cost remains constant in dollar terms, the unstable exchange rate ensures that you can’t be certain about how much naira you will be set aside for it. This uncertainty makes planning difficult and may frustrate the efforts of businesses and agencies to streamline their expenses.
Higher costs also eat into budgets and reduce net business incomes. For organizations that consider their expenditure on this front as significant, a local currency that continually depreciates against the dollar could be eroding their efforts to turn out significant profits.
The Impact of Forex Payments for Hosting on Nigeria’s Economy
The exchange rate problem exerts significant pressure on the wider economic scale. Taken together, local companies are paying millions of dollars in scarce foreign exchange to foreign hosting firms. When these payments are made, Nigeria is left with fewer dollars. And when there are fewer dollars, the demand for them will push their naira-price higher.
Local companies suffer as a result. They may be paying the same rates in dollar terms, but they are spending more naira to make the payment.
In a nutshell, companies that use foreign hosting firms are contributing to a problem that they are already suffering from.
The Remedy: Local Hosting
There’s a solution to the uncertainty, rising costs, and economic problems that foreign hosting brings. It’s called local hosting. Instead of spending dollars on this service, companies in Nigeria can switch to local hosting firms.
Here are some advantages that businesses can gain from local hosting, in terms of exchange rate issues and costs.
- They won’t have to contend with fluctuating rates and the confusion that comes with it. They can simply pay for hosting in naira.
- Rates don’t ‘change’ abruptly. Customers will usually be notified when fees have been reviewed upwards or downwards.
- There’s greater certainty around the costs that the company is incurring.
- The fees are fixed and denominated in naira, so it’s easier to plan and budget.
- The country saves scarce foreign exchange.
There are also other benefits besides the gains from denominating fees in local currency. When you host your data locally, you have more access to it. It’s easier to keep in touch with the hosting platform. Security concerns are diminished. And there’s no concern about data sovereignty.
Local Hosting: What Options Do You Have?
As Nigeria has grown more reliant on data and digital technology, cloud service providers and managed IT service companies have sprung up within its borders to fill the storage and computing needs of its many businesses. Many of these have been around for just a few years. A few have been in operation for much longer.
The quality of service you get from local hosting firms will vary as well. Some can leverage their extensive experience in the Nigerian environment, and provide high-level skill and support to their clients. But this isn’t the case for every player in this space.
Layer3 is one of the long-lived data hosting institutions in Nigeria. For over 14 years, it has helped organizations in the private and public sectors with the data storage and network solutions they need to thrive. And it continues to improve its offerings, as technology evolves and the demands of the IT market change.
Its virtual data centers and servers, backup and disaster recovery services are available to emerging businesses, large corporations, and public sector agencies, and are tailored to suit organizations from a wide range of sectors.
If you would like to find out more about Layer3 and local hosting, you can contact our team here.
The Senate has passed a bill, seeking to repeal and re-enact the National Identity Management Commission (NIMC) Act.
This followed adoption of report of Committee on National Identity Card and Population at plenary on Wednesday.
The report was presented by Senator Victor Umeh (LP-Anambra), chairman of the committee.
Senator Umeh in his presentation said the bill sought to provide for the establishment of a national identity database and the National Identity Management Commission.
According to him,the agency will be charged with responsibilities for maintenance of national database, the registration of individuals and the issuance of identity credentials.
He said the bill would lead to the creation of national identity database to source business biometric and empower NIMC to issue regulations and guidelines for implementation of the act and other related matters.
He said the bill sought to strengthen the legal framework of national and digital identity, hereby creating an optimal foundational identification ecosystem that fosters inclusion, universal coverage, and accessibility.
Senator Umeh said the act would establish a harmonious foundational identity system that is governed by a less restrictive, less cumbersome, non-discriminatory, non-punitive data protection, cost-effective, and compliance with global borders.
Senator Umeh said the bill, when passed into law, would address the challenges and limitations of national Identity management commission Act 2007, repeal it, and then close the gap of incomplete and inaccurate national identity database, provide efficient governance and service delivery.
He said the bill received overwhelming support from stakeholders at the public hearing due to the need to implement the long-awaited database system.
The World Bank has expressed concern over Nigeria’s poor statistical performance, noting that the country lags behind its aspirational peers such as Mexico, Colombia, South Africa and Brazil.
Mrs. Julie Osagie-Jacobs, director, Information and Public Relations, Ministry of Budget and Economic Planning, stated this in a statement after a courtesy visit to Senator Abubakar Bagudu, minister of Budget and Economic Planning, by a delegation from the World Bank led by Ndiame Diop, country director; and Mr Johan Mistiaen, practice mfor West and Central Africa, on Wednesday.
In his presentation titled “Next Level Statistics to Support Nigeria’s Reform and Growth Agenda,” Mistiaen stated that Nigeria’s statistical system was not on par with those of its developmental counterparts.
He advised that an annual investment of between $10m and $15m in the country’s statistical infrastructure would significantly improve performance and align Nigeria with its peers.
The statement read in part, “Earlier, Mr. Johan Mistiaen in his presentation on the next level statistics to support Nigeria’s reform and growth agenda, observed that the country’s statistical performance was not at par with its aspirational peers as Mexico, Colombia, South Africa and Brazil.
“He suggested that investing about $10-15m annually into the country’s statistical system can raise performance to that of its aspirational peers.”
Responding, Bagudu assured that the Federal Government would continue to guarantee the independence of the National Bureau of Statistics.
He commended the Bureau for consistently releasing credible and methodical data that have been relied upon by reputable international organisations.
The minister stressed that there would be no government interference in the operations of the NBS.
Federal government has disclosed that efforts are ongoing to link the National Social Register (NSR) to the National Identity Numbers (NIN).
Prof. Nentawe Yilwatda, minister of Humanitarian Affairs and Poverty Reduction, explained that the linked data would assist the country to anticipate crises, mobilize resources faster, and ensure aid reaches those who need it the most.
He said harnessing data would save the country and relevant stakeholders the stress and bottlenecks of outdated processes.
He also identified bureaucratic crisis as the biggest crisis in the humanitarian space which stalls responses to humanitarian issues.
Speaking in Abuja on Tuesday at the National Humanitarian Roundtable programme, the minister said: “People are traumatized by climate change, security threats and economic shock across the country and in the midst of these, we have limited funding.
“The biggest crisis we have is not just the people being killed, the crisis we have is a bureaucratic crisis that does not respond to a humanitarian crisis. Every delay in decision making, every inefficiency in coordination, every shortfall in funding, costs the life of people.
“They say knowledge is power, but knowledge can be destructive too. It can only be power if we use it effectively. By leveraging data and technology, we can anticipate crises; we can mobilize resources faster and ensure aid reaches those who are in need the most and without the bottleneck of outdated processes.
“We are linking the social register to national identity numbers and geotagging all homes of those who are vulnerable across the country so that if there’s any crisis, we don’t need to begin to walk around communities and taking names and asking the States Emergency Management Agency and the National Emergency Management Agency (NEMA) for data.
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