Digital Market Overview: Nigeria...cloud, network and end-point security. Digital Services Cloud, eCommerce and FinTech are among the main opportunities for UK firms in the Nigerian

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Digital Market Overview: Nigeria

A Frost & Sullivan White Paper

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2 All rights reserved © 2018 Frost & Sullivan

Overview & Methodology

To understand and help inform UK companies about emerging digital market opportunities in a number of key countries under the UK’s Prosperity Fund, the FCO (Foreign and Commonwealth Office) commissioned Frost & Sullivan to provide summary digital market research and analysis across three growing digital markets; telecommunications, digital services and cybersecurity.

The UK Prosperity Fund is an innovative instrument directing £1.2 billion of UK ODA and non-ODA investment to tackle barriers to economic growth, targeting middle-income developing countries. The Fund aims to remove barriers to economic growth in order to reduce poverty – the Fund’s primary purpose. It supports delivery of the United Nations’ Sustainable Development Goals (SDG), particularly SDG 8, to “Promote inclusive and sustainable growth, employment and decent work for all.” Removing barriers and helping harness the potential of developing markets, will also boost global and UK prosperity through increased investment and trade. It is in achieving this latter objective that Non-Official Development Assistance funding is used alongside Prosperity Fund ODA programmes, and in support of the government’s post-EU trade policy ambition and wider government policies.

.Frost & Sullivan MethodologyTo complete the project, Frost & Sullivan engaged analysts from its ICT group based in offices in Indonesia,

Brazil and South Africa. Four main activities were completed during the process. These were:

• Internal Data Audit: Frost & Sullivan leveraged information from its ongoing research programme of the ICT

sector and digital markets in the target countries.

• In-depth Secondary Research: Frost & Sullivan searched all open sources and published documents, including

company information, official government-released information and statistics, international organisations,

industry-recognised associations, as well as national and international press.

• Conducting Primary Research: Frost & Sullivan leveraged its existing networks to speak with the major

stakeholders and industry participants within the country.

• Forecasting the Market Size: Frost & Sullivan constructed a propriety and bespoke data model that captured

all of the research and analysis to forecast the market size across sectors. The methodology followed a

simple and transparent approach and used statistics from government-published sources as well as internal

Frost & Sullivan data.

Frost & Sullivan

TA B L E O F C O N T E N T S

Executive Summary ....................................................................................... 4

Key Findings ..................................................................................................... 4

Market Forecast ................................................................................................ 5

PESTLE Analysis .............................................................................................. 7

Drivers & Restraints ......................................................................................... 9

SWOT Analysis ................................................................................................ 12

Base of the Pyramid .......................................................................................... 12

Telecommunications ...................................................................................... 13

Market Overview .............................................................................................. 13

Market Size and Forecast .................................................................................. 18

Opportunities for UK Firms ............................................................................. 18

Digital Services .............................................................................................. 19

Market Overview .............................................................................................. 19



Cybersecurity Services ................................................................................... 29

Market Overview .............................................................................................. 29





4

EXECUTIVE SUMMARY

Key FindingsChart 1: Top Key Country Findings

Nigeria has over 30,000 mobile towers but will require close to 100,000 to adequately cover the population. There is an opportunity to provide towers powered by renewable energy systems.

Given limited fixed line infrastructure, there is a growing need to use satellite to connect the rural population. However, the slowing Oil & Gas sector is expected to lead to lower demand for satellite services.

Nigeria has one of the largest and fastest growing eCommerce markets on the continent. It represents an opportunity to distribute a range of goods as well as for payment services.

There is an opportunity to develop Nigeria as a BPO hub given its location, language and increasingly tech-savvy labour force. UK companies could be well-placed to offer the supporting technology.

Financial inclusion has become a key priority for Nigeria, with FinTech among the option identified to achieve this goal. However, the central bank is still apprehensive about digital financial services platforms.

Cybersecurity is becoming one of the largest markets in the ICT sector following a spate of high profile security breaches. Uptake is however limited to large enterprise while SMEs do not have the budget for security services.


5All rights reserved © 2018 Frost & Sullivan

Market Forecast

Chart 2: Market Forecast Revenue by Sector, 2017 – 2022 ($US Millions)

$0$2,000$4,000$6,000$8,000

$10,000$12,000$14,000$16,000$18,000$20,000

2017 2018 2019 2020 2021 2022

Cyber Security

Digital Services

Telecoms

$510.9 $551.3 $594.8 $641.8 $692.4 $747.1

$1,933.8 $2,250.9 $2,644.8 $3,094.2 $3,634.7 $4,273.6

$9,290.5 $10,393.1 $10,980.0 $11,566.8 $12,153.7 $12,740.6

Cyber Security

Cybersecurity is becoming one

of the key focus areas due to

growing digitisation. The main

sectors that can be targeted

include BFSI, oil & gas, public

sector and healthcare. The

main security services driving

growth in the market include

cloud, network and end-point

security.

Digital Services

Cloud, eCommerce and FinTech

are among the main

opportunities for UK firms in

the Nigerian market. This will

require engaging the central

bank and state-owned

enterprises such as Galaxy

Backbone. It is expected

international remittances and

digital payment solutions will be

key growth areas.

Telecommunications

Telecommunications is one of

the largest contributors to the

sector. Key opportunities in the

market are with mobile tower

solutions, particularly hybrid

power systems for off-grid

sites. There is also an

opportunity for VSAT solutions

in sectors that require

connectivity in rural and

remote areas.

Key Focus Areas for Digital Opportunities in Nigeria

Telecommunications Digital Services Cybersecurity

• Mobile Tower Equipment• Satellite Connectivity

• eCommerce• FinTech• Cloud

• Network Security• Endpoint Security• Firewall



Country Overview

Chart 3: Nigeria Demographics and Country Metrics

Nigeria

AbujaPopulation (2017) 186.0 million

GDP US$404.7 billion

GDP Growth(2017-2022)

1.5% est.

Foreign DirectInvestment

$5.12 billion

Key Country Metrics (2016)

Currency(March 2018)

NGN (N)1 USD = (N)360

Source: World Bank; IMF; Frost & Sullivan

Nigeria became Africa’s largest economy in 2014, over-taking South Africa; however, the economy contracted over the

period 2015-2016 following the collapse of mineral prices, which impacted the foreign reserves of the oil-rich country.

The ICT sector was worth an estimated $35.2 billion, contributing 8.7% to GDP in 2017, compared with 0.6% in 20011.

Nigeria’s National Bureau of Statistics categorises the sector into four main segments, namely, telecoms, publishing, motion

pictures and broadcasting. While the telecoms segment is the largest, contributing 75% to the sector’s revenue in 2016,

publishing and broadcasting have had the highest growths over the period 2001-2016. The sector has become one of the

key priorities for the government as an enabler for growth. This is because technology can be leveraged to cost-effectively

deliver public services and other critical services such as banking and finance, health, transportation and agriculture.

Between 2001 and 2014, the sector attracted $32 billion in FDI, originating mainly from the foreign-owned telecoms

operators, MTN and Airtel, followed by other IT service providers2. The capital importation has however, seen a dramatic

fall in recent years, by 46.9% from $9.64 billion in 2015 to $5.12 billion in 2016. This was largely due to a dramatic fall in

foreign investment within the telecommunications and the Oil & Gas sectors, which make up the bulk of the FDI. While

there were signs of a recovery in 2017, capital importation into Nigeria still remains well below those of similar size

countries, such as Indonesia. During the period (2012- 2017), the United Kingdom remained the largest contributor to the

country’s total FDI, making up 21% of total inflow.



Demographic OverviewNigeria is the most densely populated country in Africa, with 186 million people in 2016. Furthermore, the population

of Nigeria comprises a high proportion (approximately 60%) of people aged 24 or younger, which bodes well for the

prospects of the country as a digital consumer market in the long term.

Chart 4: Population Structure, Nigeria, 20163

- 20.0 40.0 60.0 80.0

65+

55-64

45-54

35-44

25-34

15-24

0-14

Population Age Groups

Population Size = 186.0 million

49%Female

51%Male

Key Population Metrics

0% 20% 40% 60% 80% 100%

Literacy Rate

Electrification Rate

Banked Population

Internet Users

Mobile Penetration

Rural Population

Low Income Population

Literacy Levels

Primary education

20%

Secondary education

34%Above higher

education16%

No formal education

30%

Social-Economic Groups

Lower Class33%

Underclass12%

LowerMiddle Class

25%

UpperMiddle Class

18%

Upper Class4%

Lower Upper Class8%

MILLIONS

47%

82.9%

50.6%

49.4%

53%

57.7%

40.4%

Source: Demographic Dividend; National Bureau of Statistics; ITU; World Bank

PESTLE Analysis

Chart 5: Pestle Analysis Summary, Nigeria, 2016

Factors PESTLE Trends Implications for ICT Industry

Political

The political environment is still somewhat uncertain but has stabilised slightly since the 2015 elections. However, the country is still plagued by transparency issues within government structures, which President Buhari is intent on rooting out.

A more stable political climate is expected to boost investor confidence and lead to a growth in telecoms and data centre infrastructure investment. However, this will require a more positive economic outlook as well.

EconomicThe current oil crisis in Nigeria has driven the Nigerian economy into recession. The CBN has tightened its stance on monetary policy in an attempt to stabilise the economy.

Low growth has led to slow investment in ICT infrastructure but more outsourcing of ICT services. The recovery is expected to see more companies digitise their operations.

SocialDeep-rooted ethnic conflict puts capital investments at risk in certain regions of Nigeria.

The government will need to resolve regional conflicts in rural areas to drive private-sector investment in ICT.

Technological

Nigeria is a leader in eCommerce in Africa and boasts the highest number of internet users on the continent. The National Broadband Plan is being carried out to drive technological and economic development in the country.

The emergence of eCommerce in Nigeria has led to an increase in the demand for digital payment solutions as the majority of Nigerians do not have credit cards and in some cases bank accounts.



LegalRegulatory framework in Nigeria is strict for foreigners wishing to operate/invest in the country.

Global manufacturers of digital products are expected to establish production facilities locally in line with the country’s drive for local content.

Environmental

Nigeria still lacks a sufficient electricity supply to satisfy the demands of its growing population. A mixture of expanding grid access and renewable energy projects has been identified as the best way to address these issues.

While electricity access to a reliable source of power remains a challenge, it is also an opportunity to offer off-grid IT and telecoms infrastructure, such as solar-powered base stations.

Overall, there seems to be a growing demand for ICT in Nigeria, particularly as services have become increasingly

affordable. While supporting structures such as infrastructure and skills have seen some improvement, the political climate

and regulatory environment have somewhat regressed relative to peer countries. This will be a concern for Nigeria’s

trading partners, but the improvement in ICT-enabling factors highlights the prevalence of growth opportunities in the

digital services market. Out of 192 countries, Nigeria was ranked 119th on the Network Readiness Index across all the

technology pillars.

Chart 6: ICT Readiness Index, Nigeria, 2014–20164

Readiness Measure Score* (2016) Rank (2016) Change in Rank (2014-2016)

Political and Regulatory Environment 3.2 117 -5

Economic Climate 2.9 90 -5

Business and Innovation Environment 3.7 111 -12

Infrastructure 2.6 113 4

Affordability 4.3 100 6

Skills 2.4 134 2

ICT Usage 3.1 109 1

Network Readiness Index Rank 3.2 119 -7

*The scores for indicators are measured on a 1-to-7 scale that captures four main subindexes: Readiness, Environment, Usage, and Impact.

Source: World Economic Forum



Nigeria has seen its overall ranking drop by seven for the period 2014-2016, reflected in the drop in the overall National

Readiness Index (NRI) score, from 3.31 to 3.15. The index reflex is meant to reflect the country’s propensity to exploit

opportunities created by ICT. This has been in part due to the major strides by network operators to provide improved

mobile and fibre network coverage. In line with global and regional trends, the cost of telecoms services, particularly

broadband connectivity, has seen a marked fall.

Drivers & Restraints

Chart 7: Industry Drivers and Restraints, Nigeria, 2017–2022

INDUSTRY DRIVERS

1-2 Years 3-5 Years 6-7 Years

A growing portion of the more than 20 million SMEs is leveraging digital tools in their operations

M(*) H H

Power shortages and the high cost of energy is forcing large enterprises to consider outsourcing their IT

H H M

Growing mobile network coverage has laid the platform for mobile-based services in retail, the public sector and financial services

M H H

Falling cost of broadband is driving innovation for IP services such as cloud and consumer content

H H M

INDUSTRY RESTRAINTS

1-2 Years 3-5 Years 6-7 Years

Business confidence has been negative since 2015, which has seen international companies such as Samsung scale back their FDI in Nigeria

H M M

The recent currency shock has limited the ability of firms to acquire imported goods

M M M

Slow economic growth is forcing enterprises to delay some of their larger IT investments

M M L

There is still a limited understanding of new technologies such as cybersecurity and cloud services amongst small and large enterprises

M M L

* The letters denote impact of driver or restraint

H -High M -Medium L -Low



Host government structures and policiesThe Federal Ministry of Communications (FMoC) supervises the telecoms sector5. The cybersecurity policy is coordinated

by the Office of the National Security Adviser (ONSA), which is the coordinating office for Nigeria’s counter-terrorism.

There are currently five main state-owned enterprises and agencies under the supervision of the ministry, whose efforts are

coordinated towards achieving the goals of the state through ICT.

General ICT

National Information

Technology

Development

Agency (NITDA)

Communications

Nigerian

Communications

Commission (NCC)

Nigerian Postal

Service (NIPOST)

Infrastructure and Services Providers

Nigerian

Communications

Satellite Systems

(NIGCOMSAT)

Galaxy Backbone

Source: Ministry of Communication

Agency6 Function Contacts

NITDA

The agency was created in 2001 to implement the Nigerian Information Technology Policy and enable the development of IT in Nigeria. The agency is responsible for developing the policies, regulatory standards and guidelines for IT and vetting major IT projects.

CEO – Isa Ali Ibrahim Pantami

Director - IT Infrastructure Solutions Abdulahi Gambo Usman

NIGCOM-SAT Ltd

The state-owned communications provider is responsible for operating and managing the Nigeria Communications Satellite systems (NigComsat-1R). Key services include transmission services, through digital or analogue systems, as well as transponder leasing within the Nigeria satellite communications market.

Executive Director – Kazim Raji

CEO – Abimbola Alale

Galaxy Backbone

The company provides IT and shared services for the federal government of Nigeria and is instrumental in driving the country’s ICT strategy. Galaxy Backbone is responsible for managing the country’s access to VSAT hubs, data centres, fibre infrastructure, and internet gateways to meet the 2020 eGovernment targets.

MD – Yusuf Kazaure

Head of Business Development – Abdul-Malik Suleiman

NIPOST

The company is a state-owned provider of postal services for local and international mail delivery. The organization has strived to expand its services through improved postal systems while also diversifying its services to include banking services.

CEO – Barrister Adegbuyi

Director Strategy and Business Development – Abdulkarim Baba

NCC

The NCC is the independent regulatory authority for Nigeria’s telecommunications industry. The regulator is responsible for not only developing the regulatory framework within the sector, but also enabling the uptake of ICT by national development projects.

CEO – Prof. Umar Danbatta

Executive Commissioner - Stakeholder Management Sunday Dare



NIGERIA ICT Roadmap 2017–20207

The development of Nigeria’s ICT sector is guided by the ICT Sector Roadmap, which is a part of the wider Economic

Recovery and Growth Plan (ERGP: 2017–2020)8. Through the plan, ICT is central to not only enabling the development

of other sectors but also improving transparency. The primary aim of the Roadmap is to make ICT one of the pillars upon

which Nigeria’s economic growth can be based.

The vision of the ICT Strategic roadmap is the provision of Universal Access of ICT for all Nigerians. Unfortunately,

this has fallen short, especially in the rural areas as costs remain too high and unaffordable for much of the population,

and investment in further infrastructure is required to increase coverage. There are four main pillars which serve as the

bedrock upon which the objectives of the Roadmap are achieved:

Chart 8: National ICT Roadmap, Nigeria, 2017–2020

Nigeria ICT Strategic Roadmap 2017–2020

VisionNigeria as a knowledge-based & globally competitive society

GovernanceLegal, Policy & Regulatory Framework

Industry & Infrastructure

Capacity Building

Cross-cutting Issues

Users

Source: Ministry of Communication

Some of the main targets of the Roadmap include:

• Leveraging BPO and other ICT sector opportunities to create two million jobs

• Using NIGCOMSAT satellites to close the rural penetration gap

• Hosting critical national data within the country

• Increasing rural access coverage by 40% over the period 2017-2019

• Localizing data and traffic

• Increasing the mass utilization of cloud services

• Digital inclusion, comprising financial inclusion and universal access

To achieve these targets there are 51 interlinked initiatives that engage multiple stakeholders across government and

the ICT industry. 20 of these initiatives are geared towards Job / Wealth Creation, 18 towards Capacity Building and

13 focus on Government Revenue Generation.



Major Market Initiatives

Nigeria has a history of cancelled or delayed ICT projects, including the national identity card project, the Code Lagos

project and the Digital Switch project. In 2017, the government announced plans to start a $1 billion company in order to

boost locally developed technology and services. According to the Minister of the Federal Ministry of Communications,

Adebayo Shittu, the company is being started to help transform Nigeria into a producer of ICT products and services

rather than just a consumer of those services produced by overseas providers9. This is expected to help position Nigeria

for the fourth industrial revolution, with plans to also build a national ICT Park and Exhibition Centre. The full details of

how the company will be built and structured are yet to be fully articulated. It is however expected to enhance Nigeria’s

ICT competitiveness on the continent.

SWOT Analysis

Chart 9: Nigeria SWOT Analysis, Nigeria, 2017

• A low literacy rate limits the uptake of some advanced ICT services due to a lack of awareness or local support

• Despite many iterations of the ICT strategy, implementation has been limited

• The cost of connectivity is still fairly high but has dropped dramatically in recent years

• Mobile penetration stands at over 80%, but due to dual SIM ownership, actual population penetration is only 50%

• There is growing demand for IP-based solutions as more Nigerians gain access to smartphones

• Value-added services in retail, financial services and healthcare are becoming a government priority

• Limited coverage in rural areas offers a long-term opportunity to provide cost-effective network solutions

• The large population makes it an attractive market for consumer ICT services

• The installation of multiple undersea cables has boosted bandwidth capacity

• A large number of foreign companies have established operations in Nigeria

• Nigeria has a well-developed ICT market compared to its regional neighbours

• There is a high culture of entrepreneurship

• Though expected to be dissipated under the current leadership, Nigeria still has a reputation of transparency issues

• The high incidence of cyber-crime limits the uptake of digital services such as cloud

• Intermittent access to power threatens the development of the ICT sector, particularly with respect to telecoms and IT services

Base of the Pyramid

BOP Industry Statistics• At 50.2%, Nigeria has one of the highest internet penetration rates in Africa and the highest number of internet users

in the region, totaling 91.5 million10.

• Nigeria has an electrification rate of 45%, and is therefore outside the top 150 global ranking11. The country suffers

daily power cuts due to a long legacy of under-developed electricity infrastructure.

• Nigeria has an overall literacy of 59.6%, skewed towards males (69.2%) compared with females (49.7%). The

government is looking to leverage advances in technology to enable the provision of eEducation in rural areas to boost

the literacy rate.

• In 2016, Nigeria had a total banked population of 53.0%, with the government aiming to increase this to 80% by 2020.

The view is that it will be through FinTech solutions that this target will be reached, hence the growing state support

for the FinTech industry by Nigerian regulators12.



BOP Industry InitiativesThere are several initiatives to provide internet access to Nigeria in urban and rural areas, which can be leveraged to

deliver critical services such as healthcare, financial services, education and energy.

• In 2016, Facebook launched the Telecom Infra Project (TIP) as part of its strategy to boost connectivity. The social

media company together with Vodafone is working on a number of connectivity projects in various African countries,

including Nigeria.

• Facebook is also partnering with one of the local connectivity providers, Tizeti, to provide Wi-Fi access to many under-

served areas in Nigeria.

• IBM also launched the “Digital–Nation Africa” initiative in 2017 to increase digital, cloud and cognitive IT skills in Africa.

• State-owned satellite company NIGCOMSAT is investing in additional capacity to help the government meet its rural

connectivity targets to enable the support of public services in rural areas.

TELECOMMUNICATIONS

Market Overview

Chart 10: Telecommunications Industry Overview, Nigeria, 201613

Telecommunications Industry Overview, Nigeria, 201613

Mobile Subscriptions 154.1 million

Mobile Penetration Rate 82.9%

Fixed-line Penetration 0.1%

Internet Penetration 50.2%

Mobile Broadband Penetration 23.3%

Mobile Coverage2G – 87%

3G – 51%

Number of MNOs 5

Source: NCC, ITU

The Nigerian communications market is highly competitive with five mobile operators—four use Global System for

Mobile Communications (GSM) networks, while the fifth uses a Code-division multiple access (CDMA) network. There

are 17 fixed or fixed wireless access (FWA) operators, with some of the mobile operators offering fixed-line business

services as well. The GSM networks support the majority of subscribers representing a 99.7% market share, while

CDMA, fixed-line and FWA subscribers comprise the remaining 0.3%. Fixed-line connectivity is, however, still dominated

by the copper-based connectivity, asymmetric digital subscriber line (ADSL), but use of the technology is gradually

declining. Satellite connectivity remains an important solution for primary connectivity in the oil & gas sector as well as

for backhaul to connect remote areas.

There is a long legacy of under-investment in Nigeria’s fixed-line infrastructure compared to other countries on the

continent, such as South Africa, and developed economies in Europe and America. As a result, operators have struggled

to cost-effectively connect their mobile sites to the core network. Thus far, the deployment of fibre has been limited,

as fibre installation is expensive and difficult in big cities and metros. As a result, greater dependency on microwave

backhaul has increased over time. Upgrades to existing legacy systems require significant investments to be made by the

mobile network operators (MNOs).



The country’s under-developed energy infrastructure has also limited the progress of the ICT industry. Nigeria experiences

power outages on a daily basis, even in the major cities. Power shortages and an unreliable energy supply are responsible

for at least 70% of cellular downtime. In recent years, there has been growing investment in hybrid systems that make it

possible to integrate renewable energy sources such as solar to minimize the cost of running the infrastructure.

Chart 11: Telecoms Industry Structure, Nigeria, 201714

• The NCC has taken a harder stance on compliance in the sector, with the fine handed to leading provider viewed as a statement of intent.

• The regulator has placed more pressure on service providers to make services more affordable

• Providers of consumers electronics view Nigeria as a key market for them in Africa, with the view to setting up local manufacturing processes

• Poor economic performance has seen some scaling back of investment in the ICT sector.

• There is an opportunity for energy-efficient cellular equipment and management of infrastructure in the long-term.

• The market for mobile communications is mostly dominated by the consumer segment, which rely on mobile technology for most of their communications services.

• While the enterprise segment dominates fibre deployment, there is a growing adoption of enterprise mobility as well.

• Mobile operators MTN, Airtel and Glo Mobil are the leading providers of telecoms services in the market.

• While they have largely focused on mobile services, there is a growing focus on fixed line services and enterprise services as well.

• Their focus on the enterprises has seen them resell cloud applications and cybersecurity solutions.

CommunicationsRegulator

Equipment Providersand Manufacturers

CSPs

Customers

Telecoms Sector Ecosystem

Recent DevelopmentsThe landing of undersea cables since 2010 has helped telecom operators build a growing broadband market presence over

the past five years (2012-2016). Mobile operators have targeted consumers and SMEs who are driving the demand for

bandwidth-heavy digital content and social media. Alternatively, large enterprises are looking to fibre in the last mile (FTTH)

for the support and uptake of IP-based enterprise communications and cloud applications. While there is some evidence of

(fibre to the home (FTTH)) deployments, uptake is still fairly nascent and mostly limited to small pockets of high-income

residents in metro areas.

The major government initiative centre is the 1-GOV.net Project. The objective of the project is to provide a shared

services platform for the public sector through extensive investment in network infrastructure, data centre infrastructure,

transversal applications and value-added services. State-owned Galaxy Backbone is responsible for building and managing

the platform as well as associated procurement of resources. This entails the management of government data centres,

networks and records. Other responsibilities include online brokerage services and messaging and collaboration tools.

In line with the project, this will require investment in IT and telecommunications infrastructure, such as data centre

equipment, and fibre networks that international providers can use.



Chart 12: Telecommunications Market Segments and Opportunities, Nigeria, 2016

FTTH, FTTBBackhaul Services

A lot of the fibre deployments have been on long-distance networks and backhaul. However, there is growing interest in last-mile fibre access.

WIRED TELECOMS

Hybrid Power SystemsMobile Tower Financing

WIRELESS TELECOMS

MNOs are adopting hybrid systems to power cellular equipment in rural areas. They are also forming

partnerships with tower companies to expand coverage.

There is still a lot of reliance on satellite technology for backhaul and for basic coverage in some sectors

in remote areas (Oil & Gas and Mining).

Cellular BackhaulVSAT in Oil & Gas, Mining

SATELLITE SERVICES

Source: Frost & Sullivan

A. Wired Telecommunications ActivitiesNigeria’s wired telecoms market is under-developed, accounting for 0.09% of all connections compared with cellular

connectivity, which makes up 99.7% of subscriptions. Under Nigeria’s current licensing market, the telecoms market is

made up of two types of fixed technology providers—the traditional wire-line operators and fixed wireless providers,

which use Code Division Multiple Access (CDMA), a fixed wireless solution. While the former is dominated by a single

provider, the latter is significantly more competitive. In 2009, there were 15 licensed fixed-connectivity operators serving

1.4 million subscribers. However, the number of providers has since dropped.

Chart 13: Wired Network Operators Analysis, Nigeria, 201615

Network Operators- CDMA Subscribers Market Share

MTN Fixed 6,495 5.1%

Glo Fixed 12,643 9.9%

ipNX 2,480 1.9%

21st Century 106,042 83.1%

Total 127,648 100.0%

Network Operators-Traditional

NITEL 154,513 100.0%

Total 154,513 100.0%

Source: NCC

Nigeria Telecommunications (NITEL) is the historical fixed-line incumbent originally state-owned but sold to NATCOM in

2015 and rebranded to NTEL. A few of the GSM operators and ISPs provided fixed-line broadband services but held only

negligible market shares in 2009. For example, 21st Century and Globacom, an ISP and GSM operator, respectively, provide

fixed-broadband services. They are the market leaders with a collective 90% share of the fixed market. Their services are

largely targeted at enterprise consumers with fibre connectivity.

B. Wireless Telecommunications ActivitiesIn 2016, Nigeria’s mobile penetration was estimated at 82.9%, a significant increase from its 2010 level of 55.0%16. However,

there is a high incidence of dual SIM ownership that is especially prevalent in Africa, and with this in mind, Nigeria’s mobile

population penetration was an estimated 50% in 2016. Dual SIM ownership is mainly due to the unreliability of mobile

networks compelling consumers to have mobile accounts with more than one network operator at a time, mostly as a

failover option.



As a result, there are still a lot of opportunities to connect more of the population across the country, particularly in the

underserved rural areas. Network infrastructure is largely concentrated around the major metros—Lagos, Abuja and Port

Harcourt—leaving most of the rest of the country with limited coverage. Therefore, there are opportunities to expand

mobile infrastructure into these rural areas, which operators are not finding a compelling business case to invest heavily in,

due to relatively low average revenue per user (ARPU) levels.

Chart 14: Mobile Subscriber Market Share, Nigeria, 201617

MTN

Airtel

9mobile

Globacom

24%

40%

14%

22%

Source: NCC

MTN Nigeria has launched its new broadband service, MTN HyNetLTE, across Lagos. The MNO is in the process of

upgrading its WiMAX network to LTE in other parts of the country as well. This is expected to increase network coverage

and internet penetration.

In addition, MainOne, a leading provider of innovative telecommunications and network solutions, has launched a Tier-3

data centre, MDX-i, to provide adequate infrastructure to cater to the growing demand for broadband, cloud, co-location,

and disaster recovery services in the country.

MTN has continued to dominate the market over the past decade in terms of subscriber share and service revenue. Etisalat,

which was rebranded to 9Mobile in 2017, experienced a pronounced drop in market share, with its financial challenges

contributing to a shift away from market growth. Airtel and Globacom have fairly similar market shares and have largely

mirrored each other’s growth trajectories over the past five years.

C. Satellite Telecommunications ActivitiesSatellite communications have been applied to the following areas:

• Weather forecasting

• Radio and TV broadcasting

• Military

• Navigation

• Global telephone and mobile communications

The main challenge with remote area connectivity is minimising OPEX so that dispersed, low-ARPU, communities are

served profitably. For MNOs, this means that future growth will require much more cell sites to cover increasingly larger

areas with smaller low-income populations. At the same time, the expanded networks are likely to bring lower revenues

due to lower income levels across those regions. Satellite has been used as one of the alternatives to provide coverage in

some of these areas as well as for industries such as oil & gas, retail, healthcare and mining that may need connectivity in

rural areas. However, the market is faced with a number of challenges, including18:

High cost of broadband—Despite significant strides taken in recent years to lower cost and improve capacity,

satellite connectivity remains relatively more expensive than terrestrial connectivity alternatives. For example, a fibre

connection with a maximum speed of 10 Mbps can cost about $55 per month compared with $61 charged for a VSAT

connection at only 2 Mbps.



Lack of technological know-how—There is a lot of reliance on the legacy infrastructure that cannot keep up

with the growing demand for capacity.

Political influence—Due to the sensitivity of the industry and security implications of satellite communications

there will be political influence in decision making.

Economic challenge—Satellite communication infrastructure projects are capital-intensive, and due to limited

funding, Nigeria still owns only one satellite.

Policy challenges—There is a lack of continuity in policy as successive governments in Nigeria tend to introduce

new policies when they come into office. With each new administration, funding and other efforts are directed

towards the priority of that administration. This includes focus on providing funding for the training of satellite experts

and engineers to enable the capabilities and competitiveness of the state-owned enterprises, such as NIGCOMSAT.

Competitive Analysis Assessment of the key players

In May 2007, NIGCOMSAT Ltd launched its first geostationary satellite, NigComSat-1 into orbit. During its service life,

it hosted a number of customers from the broadcasting industry, including ISPs, telecommunication operators and tele-

presence solution providers19.

NIGCOMSAT is also responsible for supporting the delivery of e-Government services, telecoms trunking services,

tele-education, telemedicine and Direct-to-Home (DTH) Platforms. In 2017, the company entered into a $550 million

agreement with two Chinese companies involved in satellite manufacturing. Due for delivery in 2020, the satellites are

expected to make NIGCOMSAT one of the largest providers of satellite communications services on the continent. This is

likely to pose a threat to satellite providers in the United States and the United Kingdom, which Nigerian companies have

turned to for satellite capacity in the past.

Seven companies provided satellite communications services in Nigeria in 2017, namely:

• Afcom Satellite Networks Ltd

• Cabletronics Technical Company

• DAAR Communications Plc

• NIGCOMSAT

• Securenet SatComs Systems Ltd

• ZTF-ICT Solutions Limited

• VG Technologies Limited



Market Size and Forecast

Chart 15: Telecommunications Market Revenue Forecast 2017–2022 ($US Millions)

2017 2018 2019 2020 2021 2022

Nigeria | Wireless

Nigeria | Fixed | Voice

Nigeria | Fixed | Data

$9,286 $9,873 $10,460 $11,047 $11,634 $12,221

$1 $1 $1 $1 $1 $1

$3 $3 $3 $3 $3 $2

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$ M

illio

ns

• Despite the falling ARPU, revenue growth will come from new connections and growing use of data.

• This will also drive investment in telecommunications infrastructure.

Areas of Technology-specific Strength Along with South Africa, Nigeria is considered to have one of the most advanced telecoms markets in Africa. In terms of

mobile infrastructure, Nigeria has the largest deployment of mobile towers, with about 30,000 towers across the country.

Consequently, Nigeria has attracted the interest of tower companies and technology providers looking to offer innovative

tower funding transactions and mobile technologies.

Opportunities for UK Firms

There is an opportunity for UK companies to expand cellular coverage in rural Nigeria. For example, UK-based Africa

Mobile Network (AMN) is a tower company focused on building cellular sites in Africa. AMN’s business model is built on

deploying and managing infrastructure in rural areas and then partnering with MNOs to offer services supported by this

infrastructure. AMN counts MTN and Orange among its partners but has not yet deployed any of its solutions in Nigeria.

With more funding, there is also scope to establish partnerships with other operators in Nigeria, particularly Airtel.

Major Buyers and Decision Makers

Chart 16: Telecommunications Market Key Contacts, Nigeria, 2016

Service Provider Key Differentiating Features

MTNThe South African operator is Nigeria’s largest operator by market share. The operator is open to partnering with third parties on network expansion and management.

AirtelAirtel also has a fairly expansive network in Nigeria but is looking to expand to rural areas with data at the centre of its growth strategy.

GlobacomUnlike the other large operators, Globacom is not looking to sell off its towers and is less open to working with tower companies.

21st CTL21st CTL is one of the largest telecom wholesale providers in Nigeria with extensive data centre and fibre infrastructure.



Areas Where the UK has a Specific Strength in the CountryNigeria has the largest deployment of mobile towers in Africa with more than 30,000. Nigeria is not only densely populated,

but its population is spread over a large area; therefore, a large number of mobile towers are needed to cover the entire

population. It has become an attractive market for mobile towers, from construction and sale-lease-back to outsourcing.

The market was also part of one of the biggest tower sale transactions in Africa when MTN sold over 9,000 of its towers

to IHS Towers.

Nigeria’s total imports in 2017 were $28.9 billion, with an estimated $1.1 billion (3.8%) of the total coming from the UK.20

Route to Market and Challenges to EntryIt will be important to establish strong partnerships with the leading operators in the market, such as MTN and Airtel, with

the aim to helping them increase their network coverage in rural areas. The NCC is also an important stakeholder that is

worth engaging with as increasing cellular coverage, especially in rural areas, is an important part of its mandate.

The challenge is that Nigeria’s tower market is becoming increasingly competitive, with the incumbents having a dominant

position in the market. However, providers such as AMN have a unique value proposition that allows operators to expand

their network coverage in rural areas with little capital investment risk. That the country suffers from regular power cuts is

more of an opportunity than a challenge, since companies can offer hybrid energy systems to power cellular equipment.

DIGITAL SERVICES

Market Overview

Mobile technology has been central to the development of some of the innovative solutions in Africa across a range of

sectors, including finance, agriculture, healthcare and education. Start-ups have leveraged the growing access to mobile

networks and internet services to enable innovation in these sectors. Some of the main opportunities for growth identified

in this research include cloud services, FinTech services, eCommerce and Pay-TV.

Chart 17: Digital Services Market Segments and Opportunities

SaaS IaaS

There is a growing adoption of cloud-based enterprise applications such as CRM, HRM and UC,

as well as hosting of infrastructure.

CLOUD COMPUTING

International Remittances,Health Insurance

FinTech SERVICES

Nigeria has one of the highest remittances markets in Africa due to its large diaspora in the US, UK and other

parts of Europe.

The eCommerce market ($13 billion) is one of the largest on the continent, with brands such as

Konga, Jumia and Jiji.

Payment, Facilitation, Online Marketing

eCOMMERCE

There is a growing opportunity to provide set-top boxes and video content, with operators turning to

VoD to boost service revenues.

Video Content(VoD)

PAY-TV

Nigeria has the potential to become a key contact centre market due to a large, educated and

English-speaking population.

Contact Centre

BPO SERVICES

Recent Developments



Cloud Services

» The CBN has made it mandatory for banks to store their data in-country, requiring cloud providers to have the

cloud infrastructure hosted locally. This has boosted the revenues of cloud providers in Nigeria21.

FinTech Services

» In 2012, the CBN introduced Nigeria’s National Financial Inclusion Strategy, with a target to reduce adult

financial exclusion from 46.3% in 2010 to 20% by 202022.

» Despite being initially apprehensive about offering technology-based financial products, large banks have become

more open to the FinTech industry.

eCommerce

» The future for eCommerce in Nigeria is expected to be around mobile devices.

» eCommerce platforms are looking for opportunities to move towards pre-paid models and not the ‘payment

on delivery’ options currently dominating the market. This has created the demand for payment facilitation in

Nigeria’s eCommerce market.

» Online retailers operating in Nigeria are exempt from payment of corporate income tax during their first five

years, which has enabled market growth.

Pay-TV

» Nigeria is one of the biggest markets for entertainment as reflected by the high number of pay-TV subscribers.

» Digital migration (digital switchover) has seen a growth in the demand for set-top boxes as the market moves

from analogue to digital television.

» Network operators are also exploring VoD services, a segment of the entertainment market that is still growing.

BPO » The BPO market is the largest digital services market in Nigeria with strong growth potential.

» Through the National Information Technology Development Agency (NITDA), there is a program for capacity

building for youths in business process outsourcing in Nigeria.

» The purpose of the initiative is to train Nigeria’s youth to create employment opportunities in the contact

centre market.

» This will require not only investment in training facilities, but also in IT and communication infrastructure to

support contact centre facilities.



Host Government Structures and PoliciesSeveral legislative changes in recent years have shaped the development of Nigeria’s digital services.

1 » Nigerian banks are expected to have disaster recovery plans to avoid losing financial data. The data

must be hosted in a third-party provider’s data centre facility. The CBN recently announced a data

sovereignty requirement, mandating banks operating in the market to host all of their data in-country.

This has boosted the country’s cloud services market, particularly on the connectivity and storage side.

2

» Financial institutions, recognized as FinTechs, fall under the regulation of the CBN when they offer

lending and payment services in the market. The NCC also regulates FinTech businesses when their

services are based on mobile phones and fall under the value-added services (VAS) licensing framework.

» Regulations such as money laundering may be too onerous for some of the FinTech companies, a

majority of whom are small start-ups. As a result, regulators are being forced to reconsider some of the

regulatory requirements placed on these providers and mobile money providers.

3

» Nigeria’s Consumer Protection Council Act of 1992 was considered insufficient when addressing

consumer protection in the eCommerce market. Until recently, the industry relied on the Evidence

Act (2011) for governance, prior to the Electronic Transaction Bill being passed in 2017. The latter

law is loosely modelled on the UK’s Electronic Communications Act (ECA) 2000, covering electronic

signatures that constitute the completion of a transaction.


Chart 18: Digital Services (Consumer) Market Revenue Forecast, 2017 – 2022 ($US Millions23)

2017 2018 2019 2020 2021 2022

Nigeria | Pay TV

Nigeria | mHealth

Nigeria | mEducation

$730.6 $809.6 $912.8 $1,032.3 $1,181.0 $1,397.7

$8.5 $26.6 $48.4 $74.1 $104.0 $138.4

$- $- $- $- $- $-Nigeria | Insurance

Nigeria | Fintech

$11.5 $15.39 $19.8 $24.9 $30.7 $37.3

$153.1 $211.0 $278.4 $355.8 $443.9 $543.3

$0

$500

$1,000

$1,500

$2,000

$2,500

$ M

illio

ns



Chart 19: Digital Services (Business) Market Revenue Forecast, 2017 – 2022 ($US Millions)

Nigeria | Data Centres

Nigeria | Cloud

Nigeria | BPO

20172016 2018 2019 2020 2021 2022

$49 $58 $65 $74 $84 $93

$92 $94 $102 $116 $132 $152

$745 $878 $1,021 $1,195 $1,381 $1,630

$104

$174

$1,879

$0

$500

$1,000

$1,500

$2,000

$2,500

$ M

illio

ns

Cloud Services MarketNigeria’s cloud services market is still in a growth phase because affordability and infrastructure are limiting service uptake.

Also, there is still a lack of trust in the cloud model and limited education about cloud security. However, there has been a

gradual mind shift, especially among large enterprises in the manufacturing, retail and financial services sectors.

Local, pan-African, and international aggregators and system integrators act as brokers/resellers for global cloud service

providers and tend to manage the cloud migration process.

Chart 20: Cloud Market Revenue Forecast, Nigeria, 2016–2019


PaaS2016: $7.3 million2019: $9.2 millionCAGR: 7.9%

SaaS2016: $23.9 million2019: $35.5 millionCAGR: 14.1%

IaaS2016: $60.6 million2019: $69.9 millionCAGR: 4.9%

Year2016 2019

$116m

$92m

Rev

enue

($

Mill

ion)

Iaas Saas Paas

$0

$20

$40

$60

$80

$100

$120

While there is a growing community of app developers in Nigeria, the biggest opportunity in the cloud market is not in the

platform segment, but in software (SaaS) and infrastructure (IaaS). This is expected to drive spend on IT infrastructure such

as servers, racks and computers by IT service providers in anticipation of the growing demand for cloud services.



• Demand for cloud services was estimated at $91.8 million in 2016, and is expected to grow at a CAGR of 7.7%,

reaching $114.6 million by 2019.

• Growth was initially low due to power and bandwidth supply constraints coupled with a weak economy.

• The market is driven by the limited telecoms infrastructure and power challenges in Nigeria that drive up the cost

of owning the infrastructure.

• Service uptake is led by financial services, whose technology adoption is more advanced, followed by the public

sector, oil & gas, and manufacturing.

Competitive OverviewWhile the market is dominated by international and well-established brands, local companies are the key drivers behind

the development of cloud services in Nigeria. Companies such as ipNX, MaineOne, Dimension Data and mobile network

operators are paving the foundation for development of cloud services and targeting different end-user markets.

Leading providers include local and foreign-owned telecom operators and SIs with a local presence, focusing largely on

IaaS and SaaS solutions. While IS, MTN and Vodacom have a competitive advantage in being multinational companies that

can leverage the expertise and solutions of their parent companies, MainOne, Resourcery and ipNX are West African

companies with local knowledge and experience.

Financial TechnologyIncreasing financial inclusion is one of the primary objectives of the Nigerian government and is driven by the Central Bank

of Nigeria. It sees financial inclusion as the key to achieving its mandates and growing economic prosperity of the country.

One of the biggest initiatives launched by the federal government involves the construction of a cashless society in the long

term with a goal to improve efficiency of transactions and transparency.

One of the targets of the Financial Inclusion Strategy was to reduce the financial exclusion from 53.7% in 2010 to 80% by

202024, thereby increasing the number of people with access to financial services by close to 30 million over that period.

Given the limited banking infrastructure, the CBN has become more open to FinTech solutions, further enabling the shift

towards a cashless society.

Chart 21: Target of the Financial Inclusion Strategy, Nigeria, 2010, 202025

Metric 2010 Target 2020

Access to Payment Services 21.6% 70.0%

Access to Savings 24.0% 60.0%

Access to Credit 2.0% 40.0%

Access to Insurance 1.0% 40.0%

Access to Pensions 5.0% 40.0%

Financial Inclusion 46.3% 80.0%



In 2016, the value of transactions going through Nigeria’s electronic payment systems was estimated to be just under

$200 million for the year. The interbank settlement payment systems accounted for the majority of transactions, while the

internet and mobile payments had the lowest contributions at 0.2% and 1.1%, respectively, of the total value.

NIP

NEFT

Cheques

ATM

Mobile Payments

POS

Internet

$112.44 billiion

$48.77 billiion

$18.67 billiion

$14.95 billiion

$2.28 billiion

$2.16 billiion

$0.38 billiion

NEFT - Nigeria Interbank Settlement System Electronic Fund Transfer

NIP - Nigeria Interbank Settlement System Instant Payment

Average mobile money transactions increased from $5 million per month in 2011 to $142 million in 2016.26 The growth in

Nigeria’s FinTech market is partly due to the development of payment services driven by the eCommerce market. Growing

smartphone penetration, estimated to be 28% in 2016, was also a contributing factor. World Bank research also points to a

portion of the population using digital channels such as mobile phones to make transfers and pay bills.

Competitive OverviewThere is a growing number of FinTechs in Nigeria, currently estimated to be 57, driven by the high volume of start-ups

entering the market. Large mainstream banks are also establishing digital financial products to minimise costs and capitalise

on the growing demand. This includes Guaranty Trust Bank, Diamond Bank, United Bank of Africa and Zenith Bank, which

have all launched digital payment platforms.

Established less than 15 years ago, Interswitch has become one of the largest digital payment providers in Nigeria and

across other parts of Africa as well. The company’s product portfolio is built around enabling digital payment between

individuals and organisations. Other key FinTechs in the market include eTranzact and SimplePay, which have enjoyed high

uptake in recent years.

eCommerceNigeria is considered an attractive market for eCommerce, mainly due to the growing availability of low-cost smartphones,

a large and growing young population, and increasing access to broadband. However, the digital payment landscape is

still under a period of transition, as service providers and regulators continue to explore more convenient options for all

parties in the ecosystem.

The development of the industry is attracting providers of electronic transaction solutions and platforms from Europe and

Asia. The growth of the industry has been attributed in part to the growing young population, which is more tech-savvy.



Chart 22: eCommerce Market: Service Revenue Forecast, Nigeria, 2016–2022

At least 71% of customers access eCommerce platforms on their mobile devices

Opera Mini and Google Chrome account for 41% and 28% of the traffic on eCommerce platforms

The majority of transactions are on pay-on-delivery terms, but this is likely to change in the long term

Common types of payment methods include credit card, digital wallet, EFT, POS and cash

0

5

10

15

20

25

30

35

Year

$29.2b

$13.0b

Rev

enue

($

Bill

ion)

eCommerce

Source: NBS

Competitive OverviewNigeria’s eCommerce is one of the biggest on the continent and is expected to remain so given the country’s large

population and growing acceptance of digital marketplaces. It is also becoming increasingly competitive, but has been

dominated recently by the two largest eCommerce platforms, Konga and Jumia. Unlike in some of the more developed

economies, the eCommerce business model is based on a post-paid model, where customers are willing to pay for goods

ordered online only upon delivery. This is due to their concerns about security of digital payments as well as the quality of

products, which they can only verify on delivery.

Konga and Jumia are, however, looking to align their business models to the rest of the world, which largely follows a

prepaid model, as they increasingly find the post-paid model unsustainable. Therefore, eCommerce companies are showing

more interest in local start-ups that develop reliable payment solutions. Konga and Jumia, on the other hand, are exploring

in-house payment platforms, as they expect them to help further entrench the companies in the market.

Pay-TVDuring 2015, Nigeria’s regulatory body, the National Broadcasting Commission (NBC), signed an agreement with Inview

Technologies for the provision of a national STB software system. This agreement will lead to commonality in all digital

television services in the country. The VOD market is competitive with more than 10 providers. iROKOtv is the most

popular service in Nigeria, mainly due to its Nollywood content.

Competitive OverviewThe pay-TV market is fragmented among three big providers and many small providers27. StarTimes is the leading pay-TV

7provider. Partnerships between local pay-TV providers and international media providers are enabling pay-TV providers to

strengthen the quality of their international content. For instance, Montage has partnered with Fox International Channels

(FIC) to offer more variety in its content. The Nigerian pay-TV market is growing slowly with affordability holding back the

uptake of all forms of service.



Chart 23: Pay-TV Market Share: Nigeria, 2016

Pay-TV Market: Subscriber Market Share, Nigeria, 2016

Pay-TV Market: Subscriber Market Share by Technology, Nigeria, 2016

Others

10.5%GOtv

12.3%

StarTimes

49.4%

DStv

27.8%

Cable TV1.2%

DTH

37.1%

DTT

61.7%

DTT: Digital Terrestrial Television , DTH: Direct to Home


MultiChoice (through DStv) enjoyed a monopoly for many years until StarTimes entered the market in 201028. Apart from

MultiChoice’s exclusive rights to CNN, EPL, and Champions league, the Mexican television network known as Telemundo,

which is available on the MultiChoice platform, has created a lot of interest among Nigerians. However, the provider’s high

prices were increasingly unaffordable for Nigerians.

There is also growing interest in VOD through smaller providers and network operators looking to boost the average

revenue per user. iROKOtv has the largest online VOD content catalogue with more than 5,000 Nollywood movies, giving

it a competitive edge. iROKOtv has also developed tailor-made services for both feature phone and smartphone users,

offering these services both on websites and mobile platforms. In late 2015, the country’s largest mobile operator, MTN

Nigeria, paid $170 million for a DTT license from the NBC. This will enable the operator to further diversify its services.

KairosWebTV is a Web TV platform for emerging and aspiring entrepreneurs and start-ups. It provides news and insights,

technology trends, events, edutainment, skits, and online digital training. The service is configured to save users’ data

while allowing seamless viewing through 2G, 3G, or 4G/LTE networks. The key challenge faced by providers is the under-

developed infrastructure and the high cost of operations in Nigeria. As a result, services are priced higher, hampering

market growth. This also explains the low TV penetration in Nigeria.

Areas of Technology-specific StrengthService providers in the market are largely involved in the service side rather than the technology development side.

Nigeria has a fairly limited industrial base of technology development in-country and mostly relies on imported hardware

and software. For example, the majority of the handsets in the market are shipped from overseas markets, with only a small

portion developed locally.

In a move to boost the ICT sector, particularly for locally developed technology, the government has been reported to

be considering investing $1 billion to establish a state-owned ICT company as a step towards driving locally developed

technology29. This comes from media reports through which the aim is to avoid Nigeria becoming a ‘dumping ground’ for

ICT products developed by international vendors. Even though the technology focus has yet to be fully articulated, like

Galaxy Backbone, the company is expected to limit some of the opportunities available to service providers from overseas

markets in the long term.




Cloud – Servers, desktop, racks and other infrastructure for the cloud market are imported from overseas markets.

Most of the software-based cloud services, such as ERPs, are provided by international companies like SAP, Oracle

and Sage. There is a growing opportunity for UK-based Sage to establish itself in the market by catering to SMEs in

Nigeria that are showing a growing appetite for cloud services. Local Nigerian IT services providers are, however,

looking to develop CRM and HRM solutions to rival some of the solutions offered by international providers. Unified

communications (UC) is also becoming an important solution for large enterprises and within the BPO sector, for which

there is still little competition.

FinTech – UK companies such as RedCloud offer cloud banking platforms to help drive Nigeria’s FinTech market, which

local providers do not.

eCommerce – Nigerian companies are ramping up their capabilities in this space, particularly with respect to web

hosting and web design. They are still somewhat limited to the eCommerce payment platforms.

Pay-TV – While Nollywood is providing relevant content for the market, there is still an opportunity to meet the growing

demand for television series and live sports from international markets, including football, basketball and Formula One racing.

Moreover, with the TV penetration still fairly low, there is a large addressable market for set-top boxes in Nigeria.

Major Buyers and Decision MakersFinTech – The FinTech Association of Nigeria (FinTechNGR) is a key stakeholder in the development of the industry30.

The association has close ties with all the major financial services bodies in the country, including the CBN, Security

Exchange Commission and National Insurance Commission.

eCommerce – The main stakeholders to target are the large and medium-sized eCommerce platform providers including

PayPorte, Jumia, Konga.

PayPorte

Jumia

Konga

Cloud Services – The target should be the leading systems integrators and managed services providers who can resell

cloud solutions in the market. These include Internet Solutions, Soft Solutions Limited, Vodacom Business, Resourcery.

Internet Solutions

Soft Solutions Limited

Vodacom Business

Resourcery

Pay-TV – It is important to engage with the leading broadcasters, National Broadcasting Commission (NBC) and network

operators looking to offer VoD and triple-play services. These include NBC, Multi-choice, ipNX, Suburban FibreCo

NBC

Multi-choice

ipNX

Suburban FibreCo



Areas Where the UK has a Specific Strength in the CountryIn the cloud market, there is an opportunity for UK companies to provide supporting IT equipment for cloud service

providers. The data sovereignty requirement on banks has led to a growing spend on IT and telecoms infrastructure as

service providers look to boost capacity in preparation for the growth in demand for cloud services.

There is also an opportunity to offer CRM, HRM and ERP solutions in the market for SMEs and large enterprises. While

large foreign vendors may dominate the ERP space, local providers are developing their own CRM and HRM solutions

rather than reselling those of providers from overseas markets, such as Oracle, SAP and Sage.

The UK is rated among the leading countries in terms of FinTech activity and best regulatory framework. London is ranked

the best of the world’s hubs for FinTech investment by the Global FinTech, ahead of Singapore and New York. Moreover,

the UK accounts for the second-highest immigration population from Nigeria. This would make remittance solutions an

attractive opportunity for FinTech providers on the UK-Nigeria remittance corridor.

Route to Market and Challenges to EntryCloud – Providing IT services such as cloud within the public sector will require engaging with Galaxy Backbone as it

is responsible for supporting most of the government’s communication and IT operations. In the private sector, it will

require targeting the larger and medium-sized IT providers that can resell ERP solutions and CRM solutions targeted at

the BFSI, retail, manufacturing and oil & gas sectors.

Fintech – Close engagement with the FinTechNGR will be critical as the association and the CBN are still trying to

help drive financial inclusion through Fintech. Partnering with them to develop standards and create awareness will help

establish the UK as a key partner in the market, which can be leveraged by UK firms.

eCommerce – There is a range of solutions that UK firms can offer Nigeria’s eCommerce providers, from mobile

advertising to payment solutions and storage. The target should be the country’s biggest platforms, Konga and Jumia, as

well as Payforte, a smaller but increasingly important provider in the market.

PayTV – Triple-play providers are increasingly looking for relevant local and international content to compete with the

leading TV broadcasters. It will be important to target some of the niche triple-play providers such as Suburban FibreCo

and ipNX. Engagement with the NBC is critical to establishing a strong presence in the set-top box market, with UK

provider Inview having already gained the confidence of the broadcasting regulator.



CYBERSECURITY SERVICES

Market Overview

Chart 24: Security Market Landscape, Nigeria, 2017

• Nigeria is one of the more digitally advanced countries in

Africa and is, as a result, a hotspot for cyber-attacks along

with Kenya and Uganda.

• The economy lost an estimated $550 million to

cyber-crime in 201630, more than double the loss suffered

by Kenya.

• While there is a growing recognition to protect their

systems, greater efforts are required to increase

enterprises’ awareness of the scale.

Market Evolution

• The rising number of attacks, particularly DDoS, has

been central to the growing demand for security

services by enterprises. Providers are adapting their

security services to the growing move into the cloud.

Addressable Market

• Security services are largely targeted at enterprises

with finance and payments focus, e.g., banks, insurance,

and ecommerce.

• Government agencies and departments such as the

revenue authority and ministry of finance are leading

the uptake of security in the public sector.

Competitive Environment

• The market is dominated by systems integrators and

operators that partner with international security

vendors. Local providers provide bespoke security

solutions for the market.

• While still at an early stage of development, the market

is moving to managed security services.

Host Government Structures and PoliciesAn indirect consequence of Nigeria’s growing digitisation has been the proliferation of cyber-attacks against consumers and

enterprises. As a result, cybersecurity has become such a key priority for Nigeria that it is one of the areas falling directly

under the purview of the presidency through the Office of the National Security Adviser (ONSA)31. The country’s National

Cybersecurity Strategy will shape the cybersecurity market.

As part of the cybersecurity strategy, the government is encouraging public/private sector collaboration, which will include

communications service providers and financial institutions. While the strategy document highlights overall challenges

and strategic direction for cyber security at a national level, there will be sector-specific plans to ensure alignment while

catering to sector-specific dynamics. The ICT and financial sectors are among those whose cybersecurity framework will be

influenced by the relevant ministry under which they fall.



Stakeholder Structure

Chart 25: Cybersecurity Market Structure, Nigeria, 2017

• Distributors are an important middle-man for the main stakeholders in the market. They are responsible for the mass distribution of large volumes of vendor products.

• In Nigeria, Westcon and ConSol are among the leading distributors, but are not responsible for the deployment and support.

• Some of the leading vendors in the Nigerian market include Fortinet, Radware and Kaspersky.

• There is growing pressure on vendors to offer comprehensive solutions to cater to all security needs.

• Despite having a local presence, they rely heavily on distributors and resellers to drive and market their products.

• Security solutions in Nigeria are targeted at the enterprise segment, particularly in retail, finance, the public sector and manufacturing.

• Due to the growing complexity of security attacks and solutions, there is a growing demand for managed security service providers in large firms.

• Large IT providers are using the strength of their brand to establish a presence in the security market.

• The market is dominated by leading foreign and local systems integrators. ISPs and CSPs are also looking to enter the market to grow their enterprise solutions.

• There is a growing number of security consulting providers.

Distributors

Security Vendors

Resellers andSystems Integrators

Customers

Cybersecurity Market

Ecosystem


• Future projections for the cybersecurity market include:

» In 2016, the market for cybersecurity was estimated to be worth $420 million and is expected to grow by a

CAGR of 7.9% to reach $663 million by 2022.

» This will be driven by the growing adoption of cloud bundled with security products, and growing demand for

standalone solutions, particularly by large enterprises.

» Most of the demand will come from the BFS and public sectors as they look to protect more of their IT

environment. Network, cloud and endpoint security are expected to be the leading security service types.

» The rising number of attacks and their magnitude have placed cybersecurity high on the agenda of a lot of large

enterprises, particularly in financial services and the public sector.



Chart 26: Cybersecurity Market Revenue Forecast, 2016 – 2022 ($US Millions)

20172016 2018 2019 2020 2021 2022

Government

Commercial$54 $58 $62 $67 $73 $78

$420 $453 $489 $528 $569 $614$85

$663

$0

$100

$200

$300

$400

$500

$600

$700

$800$

Mill

ions


» State-owned Galaxy Backbone is the key provider of infrastructure services for the public sector but plans to

outsource security services to local systems integrators.

» The market for managed security services is still at an early stage of development but is beginning to take off.

» Key solutions include infrastructure protection (endpoint, email gateway, data security), network security

(firewalls, penetration testing), and consulting (PSI, ISO certification, support services).

Chart 27: Key Security Product Trends, Nigeria, 2016–2022

Segment Level of Demand Comments

Identification,

Authentication and Access

Control

Enterprises are looking to optimize their authentication and access controls. As

more of the data becomes digital, it is increasingly accessible across a number of

platforms and devices.

Network Security

Network security remains one of the key security areas in Nigeria due to

increasingly connected enterprises. These are becoming more vulnerable to cyber-

attacks on their wireless networks.

End-user Device Security The trend towards connected devices is driving the adoption of end-user security,

with a growing number of enterprises adopting bring-your-own-device policies

Incident Response and

Management

The high spate of cyber-attacks is driving the demand for incident response services

to limit the severity of breaches.

Training, Awareness and

Education There is growing interest to increase awareness of security among employees.

Cyber Professional Services The complexity of security hacks has forced companies to consider sourcing

security professional services from external providers.




According to a global survey by leading security vendor Fortinet, IT decision makers rank wireless networks and

endpoints as the most vulnerable component of their IT infrastructure33. At least 80% of them felt that their wireless

local area network (WLAN) had insufficient security in place, with a major concern about the risk of losing corporate

and customer information34.

Network security is one of the most prominent services in the Nigerian market and is expected to remain so in the long

term as more enterprises begin to digitise their operations. With cloud adoption becoming prevalent in Nigeria, cloud

security is expected to be the highest growth segment in the security market, in line with global trends.

Competitive Analysis The cybersecurity market is highly fragmented, with a lot of small security providers and a few large systems integrators

in the market. Internet Solutions and Vodacom are among the few providers offering managed security services. Service

uptake is led by BFS and the public sector, primarily finance-related units such as the tax authority and ministry of finance.

Chart 28: Assessment of the key players, Nigeria, 2016

Service Provider Key Differentiating Features Growth Strategy

Internet Solutions

One of the only MSSPs in the market, IS has the

potential to become the dominant provider of

security services for large enterprises

Extensive network of security vendors provides

it with the potential to become a one-stop

provider of security services

Soft Solutions

Limited

SSL has a long history of providing IT solutions

in Nigeria and has evolved into a key provider

of consulting and security services

Looks to improve awareness of security,

providing training for its clients. It is also

looking to add cloud to which it can bundle its

security products

Vodacom Business

Like IS, Vodacom offers managed security

services for its growing client base, albeit

outsourcing the technical support to TigerLogic

Vodacom is looking to focus more on

enterprise value-added services, leveraging

infrastructure of other providers in the market

Resourcery

Resourcery has access to some of the largest

enterprises in the market through providing

data centre equipment across all sectors

Leveraging its access to customers and market

insights to expand its cloud presence


While the market is fragmented, the leading providers in the market include systems integrators, some of which are foreign-

owned, as well as network operators that have expanded their service offering beyond connectivity. Service providers offer

a range of IT security services, including network, cloud, endpoint, and email security. A few also offer mobile, application

and data security services. Large IT providers in Nigeria mostly bundle cybersecurity into their cloud solutions but continue

to offer it as a standalone solution for clients looking for tailored offerings.

Internet Solutions and Vodacom Business are among the few providers in the market that offer managed security services;

the latter sub-contracts the service to TigerLogic. MSSP’s strength in the market lies in partnering with leading international

security vendors, such as Fortinet, and then managing the relationship with the client.

Areas of Technology-specific StrengthThe industrial base of cybersecurity in Nigeria is relatively weak, with the reliance on international suppliers to provide

technological expertise. The industry is developing, and organisations such as the non-profit Cyber Security Experts

Association of Nigeria provide initiatives for experts to come together to help discuss and promote improved cybersecurity

across the country. It is expected, along with regulations such as the Cyber Security Act 2015, to drive the development of

cybersecurity providers in the country and to build greater technological capability and expertise.




Major Buyers and Decision MakersWhile there is a growing uptake of security services across different verticals, special consideration is recommended for

BFSI, the public sector, healthcare and oil & gas. The chart below provides a summary of the key customers within each of

the sectors. Based on a 2016 survey by Serianu, an estimated 95% of Nigeria’s 1.25 million organisations spend no more than

$5,000 per annum on cybersecurity. This leaves only 62,500 organisations with a cybersecurity budget worth pursuing36.

Chart 29: Sample Target Cybersecurity Customers by Sector, Nigeria, 2016

Sectors No. of Registered Companies Leading Organisations Contacts

BFSI22 Banks

60 Insurance 71 Finance

UBA, Zenith, EcoBank N/A

Public Sector26 Ministries

42 Government agenciesTreasury, Central Bank, Nigerian Federal

Inland Revenue ServiceN/A

Oil & Gas35 +100 companies across the value chainExxon Mobil, Statoil, Chevron, Shell, Agip,

Petrobas, TotalN/A

Healthcare +40 Healthcare companiesHygeia HMO Limited, Total Health Trust

Limited, Multi Shield Nigeria Limited, Clearline International Limited

N/A

Financial Services

BFS is considered the key hotspot for cybersecurity attacks due to the size of enterprises, but predominantly as a

result of managing large depositories of cash and transactions. Adoption of security services in the sector is driven

by the CBN (Central Bank of Nigeria), which has called for banks to submit their cybersecurity frameworks due to

growing security fears.

Government and Public Sector

Finance-related government ministries and agencies such as the ministry of finance, CBN and revenue authority (tax)

are the main users of security solutions as they are most targeted by hackers. Service uptake is driven by the move to

eServices, which will entail taking up cloud and IoT services. For the federal government, services will be selected and

deployed through Galaxy Backbone.

Oil & Gas

Oil & gas organisations in the country are dominated by international organisations headquartered in Europe and America.

Most cybersecurity is delivered from regional or international headquarters and procured as part of the wider international

systems. This limits the expenditure of cybersecurity services and products directly from Nigeria in this sector.

Healthcare

Healthcare remains a target for malicious cyber activity and a priority for protection. Although larger commercial

companies will have a certain level of cyber protection, greater investment is required. In addition, the wider public health

system is a priority for protection as part of the Cyber Act 2015 and government programmes.

Areas Where the UK has a Specific Strength in the CountryThe UK has a number of large and small security providers that offer relevant solutions to meet Nigeria’s growing need for

cybersecurity. This includes BT and PWC in network security, Sophos and Becrypt for antivirus and malware protection

and hacking, and BAE and Citicus in cyber-analytics and risk intelligence. DarkTrace is another emerging provider using

artificial intelligence and machine learning to detect and prevent cyber-attacks.



Large Nigerian companies, particularly in the financial services, manufacturing and oil & gas sectors, generally prefer

recognised global brands for sensitive and mission-critical operations such as security. This will be an advantage for UK

companies such as DarkTrace and BAE that have built a track record of delivering such solutions at global and local levels.

Route to Market and Challenges to EntryThe market is becoming increasingly congested, and would require significant investment to set up a local office to serve

the local market. The most feasible option for companies without in-country presence is to consider partnering with local

resellers and systems integrators.

For all services provided to the public sector, it will be critical to engage closely with Galaxy Backbone. The company is

driving the government’s adoption of technology, including both cloud and security services. For the private sector, it will

be important to consider partnerships with Internet Solutions, MTN, Vodacom, MainOne and Resourcery. Resourcery has

fairly close ties with Galaxy Backbone, providing the state-owned enterprise with support and equipment. There should also

be greater dialogue with CBN to partner on creating greater awareness of security threats and solutions within the financial

services sector.

Direct engagement with the government at a national level, between the UK and Nigerian governments, will be central to

the ability of UK companies to sell security services in Nigeria. ONSA and the CBN are among the key stakeholders that

can help ease the entry of UK cybersecurity companies in the market. The CBN, for example, has a strong influence on the

uptake of IT services and infrastructure in the sector. Nigerian banks have been noted as being fairly reluctant to adopt new

technology concepts until they have been proven safe and reliable through the use cases and experience of their peers.

It will be critical for a UK security company to build a strong partnership with one of the leading banks and, through a local

provider, deploy and support its security solutions with the view of building credibility in the market. It also is critical to

ensure that high reliability is maintained to avoid any damage to the security provider’s brand and reputation in the market.

In general, given the sensitivity of cybersecurity at the highest level of government, the importance of high standards of

service cannot be overstated as there is a risk of attrition from other products.



E N D N OT E S

1. National Bureau of Statistics - http://www.nigerianstat.gov.ng/

2. AllAfrica - http://allafrica.com/stories/201607280992.html

3. World Bank - https://data.worldbank.org/country/nigeria

4. World Economic Forum - http://reports.weforum.org/global-information-technology-report-2016/networked-readiness-index/

5. FMoC - http://www.commtech.gov.ng/departments/telecomms-postal-services-tps.html

6. FMoC - http://wrf.nigeriagovernance.org/organizations/view/641

7. FMOC - http://www.commtech.gov.ng/Doc/Nigeria_ICT_Roadmap_2017-2020.pdf

8. Federal Ministry of Budget and National Planning - https://yourbudgit.com/wp-content/uploads/2017/03/Economic-Recovery-Growth-Plan-2017-2020.pdf

9. AllAfrica

10. NCC

11. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

12. Ericsson

13. ITU

14. NCC

15. NCC

16. ITU

17. Frost & Sullivan

18. New Media and Mass Communication

19. NIGCOMSAT

20. International Trade Centre

21. The Guardian

22. CBN

23. Please note that there was no indication of a sizeable market for mEducation in Nigeria.

24. ThisDay

25. CBN

26. NBS - 2016

27. Frost & Sullivan

28. ThisDay

29. Allafrica.com and Vanguardngr.com

30. The Guardian

31. Serianu Ltd, 2017

32. ONSA

33. Fortinet, https://www.fortinet.com/content/dam/fortinet/assets/solutions/Survey-Report-SAA-2016.pdf

34. Fortinet

35. Serianu

36. Many oil & gas companies are foreign and most of their IT strategies and decisions are made by their overseas-based head offices.

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Digital Market Overview: Nigeria...cloud, network and end-point security. Digital Services Cloud, eCommerce and FinTech are among the main opportunities for UK firms in the Nigerian