By RARZACK OLAEGBE
Regulator requires domestic data residency as a condition for operating.
You have a sense of security whenever you open a bank app on your smartphone. You feel close to your favourite music and football stars because you follow their social media accounts. You understand their nuances, sweet nothing, and vanity. It is like holding a ringside ticket to the world’s greatest boxing tournament. You are in the octagon. You are flowing with each punch. You weigh in on every banter. You have become the party. You are no longer nursing the fear of missing out [FOMO] on the party.
On the one hand
Likewise, some local data centre operators who do not have storage business of banks, fintech firms, and payment platforms may be nursing the fear of missing the opportunity that the Central Bank of Nigeria [CBN]’s directives would bring. For those who are already doing business with the transaction payment firms, such fear is absent. The business will come. Because they have built a world-standard data centre. Again, because the CBN’s pronouncement signals business prospects for local data centre operators.
On the other hand
The Director of the Payments System Supervision Department, Rakiya Yusuf, in a circular, said the CBN’s directive complied with the Nigerian Data Protection Laws and Regulations. Besides, it is part of a broader regulatory push to ‘’strengthen oversight, improve transparency, and reduce concentration risks in Nigeria’s fast-growing digital payments ecosystem.’’ The affected institutions have until January 1, 2027, to comply.
In the long term
The United Nations Conference on Trade and Development [UNCTAD] said that more than 130 countries have data protection or localisation requirements. These rules become a defining constraint for global merchants, governing where payment data can be stored, processed, and accessed, often with little alignment between regions. Before, this new requirement did not concern a country like Nigeria. It was for highly regulated markets. Now, ‘’it affects a growing number of countries, payment methods, and transaction flows’’ including Nigeria.
Where payment data resides matters. Data here refers to a cardholder’s information. Transaction metadata. Login details. Know Your Customer [KYC]. Audit records. Therefore, the CBN has ruled that such data must stay in our backyard. Research has further shown that many forces are behind stricter localisation requirements. For instance, the federal government wants better oversight of financial data. The CBN wants faster access to records during investigations.
At the micro level, bank customers and telecom subscribers want stronger protection over how their data is used and where it lives. These forces are pushing the localisation of payment data around the world. We have payments in the middle of the requirement. Because data involves sensitive financial information and cross-border flows.
Gr4y.com explains that as digital commerce expands, regulators around the world seek to prevent the unchecked movement of data outside their jurisdictions. That is the trend. Local regulators require domestic data residency as a condition for operating. Banks, fintech firms and payment service providers must comply. Among the six data centre operators, which one will get the lion’s share?
In the short term
Now that payment transaction data will reside in our backyard, the federal government and CBN can have a sense of security.
Fun fact
Data centres consume a whopping 2% of the world’s electricity, equivalent to the annual energy consumption of a small country. Cooling these facilities also adds to their energy load.
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