Why AWS Naira Payment Option Is Not Good For The Tech Ecosystem
Amazon- market leader in global cloud services has now included the Naira as part of its payment options. Customers in Nigeria can now pay for AWS services in Naira. According to the company, the motive behind this option is to ensure that its customers in Nigeria can now cut costs that have long been associated exchange rate volatility as well as challenges in paying in dollars. This move will help localize payments experience.
The Naira is one of the eight new currencies that are now being accepted for local payments, thereby extending the benefit to other countries. The currencies newly included in the option of currency payments for AWS services include; The Chilean Peso, Colombian Peso and Uruguayan Peso (UYU). Overseas customers can also now pay in Egyptian Pound (EGP), Polish Zloty (PLN), Romanian Leu (RON), and Ukrainian Hryvnia (UAH).
Amazon Web Services Motivation
According to a quote pulled from Nairametrics, AWS says:
“Local currencies are important in localizing the payment experience for customers. With payments in their local currencies, customers can avoid foreign exchange costs associated with making foreign currency payments. “Also, it removes payment friction for customers in countries where local regulations put limits on the foreign currency amount a customer can access.”
However, what impact will this move have on local competitors?
Technology Policy and Local Competition in Nigeria
The introduction of Naira payment option in Nigeria may have an inordinate effect on Nigerian cloud providers like Okra’s Nebula, Nobus, Layer3. These local companies developed solutions to take advantage of exchange rate volatility, which earlier shot up costs of service delivery. The timely development of local cloud solutions also coincided with the struggle for startups and mid-sized businesses to pay for their dollar obligations.
While cloud services had been erstwhile dominated by Google GCP, Amazon AWS and Microsoft Azure, local providers captured parts of the cloud market because of economic distortions that made these foreign technology services inaccessible.
In narrating their motivation to develop cloud solutions for Africa, Okra, through its CEO; Fara Ashiru noted that; “For too long, Africa has leaned on imported solutions, paying premiums for software and services,”
The above statement by Okra’s CEO underscores data shared by National Office for Technology Acquisition and Promotion (NOTAP) , through, Punch Online, where it has been noted that Nigeria imported $336.43 million in 2020. The Nigerian Communications Commission notes that Nigeria imported 77% of its software needs. In the same vein, The National Office for Technology Acquisition and Promotion notes that software makes up about 70% of Nigeria’s technological imports.
How Should Nigeria Handle This?
While we don’t encourage protectionist policies, we need to develop a strategy to limit this “technology dominance”. Though, policy makers have carefully created a National Cloud Computing Policy which is supposed to encourage a “Cloud First” approach in public procurements, as well as a 30% increase in cloud computing adoption by SME’s and Federal Public Institutions (FPI). Whether these goals have been met is a different consideration, but they are laudable to the extent that they enforced, in relation to a clause in the National Cloud Computing Policy that mandates that government agencies should consider local providers first.
However, there is the issue of beneficiation of human capital in Africa, where the agenda is that there should be more home-grown value addition and internal value chain development, including technology products. This is almost impossible if tech giants with deeper pockets implement policies such as currency substitution that can kill or limit development of local technology firms like Okra, Nobus and Layer3, not to mention the likelihood to impair their assets and business operations. This then evolves into a larger conversation of tech enterprise sustainability in Africa, where the greatest threat remains tech giants like Amazon, Google, Facebook etc.
While the underlying tenets of capitalism provides for free trade, democracy, individual freedoms and movement of talent across borders, it is also limitless in how people or organizations with inordinate capital stifle growth of new companies. This phenomenon led to the development of the Sherman Antitrust Act of 1890 in the USA, the headquarters of modern capitalism. The same law was used to disintegrate the empire of John D. Rockefeller, and used to attack the monopoly tendencies of Microsoft in 1998. Recently, Google has been under the radar of the Department of Justice to institute a proceeding to mandate Google to sell Chrome. All of these happens internally in the US, underscoring the harm that big businesses often do to overall growth of the economy, both locally and globally.
We can draw motivation from China. The Chinese Communist Party has implemented a policy that ensures that local tech companies dominate the market first, hence, China’s Weibo replaces Twitter, and Baidu is in place of Google, while WeChat is in place of WhatsApp. Currently, TikTok, owned by ByteDance, -a Chinese company, dominates the social media space in the USA, triggering national security actions that now warrant its closure. China is also catching up with the USA in Large Language Models and Super Computers.
In today’s world, technology and information is the most important commodity, hence, making them national security and primary economic concerns. In India, import duties, ranging from 2.5% to 20% on software and technology products, perhaps Nigeria through NOTAP and customs should consider this, however, it has to be tied to key performance indicators, which are described briefly below.
The challenge with information technology in Nigeria is capability of human capital, electricity and shortage of risk capital. Nigerian authorities must be able to correctly assess the capability of local firms to meet demand of corporates, startups and government agencies before structurally pricing out international firms like Amazon. If we can ascertain that these factors are optimal, then it is a direction worth considering to protect local industries.
If we go this route, we will be in the right boat. We can further draw references from anti-trust actions in Europe, where American tech giants are facing a plethora of anti-trust challenges. Europe’s policymakers are not sitting back to watch their local technology businesses go out of business.
The National Cloud Computing Policy and First Choice Consideration For Local Cloud Providers.
The National Cloud Computing Policy policy provides for a “a first choice consideration” for “local cloud providers”, which appears ambiguous.
Will a tech giant like Amazon with infrastructure sited in Nigeria be considered a local cloud provider? If the answer is Yes, it means we have prioritized foreign direct investment ahead of building a thriving local content base for our technology industry. This component of the policy needs to be clarified before further policy action is taken.
Okra and AWS
In November 2022, AWS opened its first offices in Lagos in order to support its growing customer base and partners in Nigeria. However, in 2023, the hyperinflation and huge bump in exchange rate provided an incentive for players like Okra; an open-banking platform to launch Nebula- its cloud offering, in October 2024.
AWS set out to support organizations of all sizes, including startups, enterprises, and public sector agencies as they make the transition to AWS cloud.
According to Nairametrics, in January 2023, Amazon launched its AWS Local Zones facility in Lagos to reduce latency and improve performance for Nigerian businesses, which is an important factor since many Nigerian companies host their services in AWS’s European region due to geographical proximity. Okra on the other hand has launched locally with its brand positioning focused on Africa, hence its tagline is; “A Cloud for Africa”. Upon launch, Okra promised to deliver the following, according to its CEO- Fara Ashiru;
• Pay in Naira or your local currency—no more unpredictable exchange rates.
• Lower latency, Tier 3/4 data centers, ensuring reliability like AWS or Azure.
• Data compliance and security—built with Africa’s regulations in mind.
According to a report by Tech Cabal, 70% of government agencies run on Azure, GCP and AWS. How much of the market local providers like Okra, Nobus and Layer3 have captured, is not valued yet. Finally, it is our view that local providers be considered as a critical part of our economic content and technology policy. We must not focus on only FDI, our local technology businesses must grow large enough to compete beyond our borders.
