Quest for foreign web hosting, domains offering upside risk to capital flight with annual outflow of $59.8m

The growing and never-ending penchant for foreign top-level domains (TLD) such as .com, .org over Nigeria’s .ng is providing an upside risk to capital flight, according to analysts.

business a.m. learnt that Nigeria would continue experience capital flight due to the non-patronage of the local domain name in spite of the low exchange rate value of the naira against major international currencies.

This situation described by analysts as a money-spinner for the US, is further exacerbated by the choice of many Nigerians who prefer hosting their websites outside the shores of Nigeria thereby fueling the pressure on capital flight.

The effects are immense, even as policy makers have argued that there is an urgent need to implement economic policies that can re-invigorate domestic investment and discourage capital flight to enhance growth in Nigeria.

Nigeria already loses about 72 percent of the revenue it should be generating through local hosting of websites to the US, according to HUB8 reports while $59.8m (N21.8bn) is estimated to be spent this year on foreign web hosting services alone.

Similarly, the latest figure as of June 2018 from Nigeria Internet Registration Association (NiRA) shows that Nigeria’s .ng domain names stood at 106,000, despite over 37 million businesses in Nigeria that have websites. In November 2017 NiRA reported that only 1.3 percent of the total Nigerian websites (.ng) were hosted in the country.

business a.m. gathered that foreign web hosting companies like Goddaddy, WP Engine, Bluehost, SiteGround etc. host most of the websites owned by Nigerians, whereas local web hosting companies, Spiraltech, HostNowNow and others struggle to get the required patronage from Nigerians.

The never-ending preference

Local web hosting companies still have a compendium of issues such as customer service, frequent downtime, data loss, slow loading of sites, transfer of cost etc. to deal with.

Industry players who are familiar with the matter believe that the cost of hosting abroad is cheaper than the cost of hosting in Nigeria. This situation compels many businesses to seek for cost-effective alternatives abroad.

Ironically, the high naira-dollar exchange rate ought to have been a major reason to stop patronizing foreign web hosting companies or even paying for .com or .net. But Nigerians are not deterred at all.

“A typical Nigerian business man who knows about the challenges confronting Nigerian local web hosting companies will not hesitate to seek the services of foreign web hosting firms. The likes of GoDaddy and co may not be perfect, but miles away better than Nigerian web hosting companies,” said Chukwuemeka Fred Agbata, director at NiRA who owns over 30 .ng domain names.

Most of the Nigeria’s leading data centres like MainOne, Rack Centre, Web4Africa offering web hosting, virtual private service (VPS) hosting and cloud services etc. are still facing the challenges such as the high cost of bandwidth, fibre-cut, power outage etc.

“Power is usually an issue for web hosting companies in Nigeria that need to run a server round the clock without any downtime,” say Destiny Amana, chief executive officer at Icecool Contracts Limited.

“If you decided to host your servers in Nigeria by hook or by crook, there are companies that will look after your power and data issues in their data centres. But if I come to the data hosting company, they may pass on the cost of power, Internet bandwidth and manpower for monitoring the servers,” said Amana.

Further, most are Nigerians still ignorant and wallow in skepticism due to the fear emanating from insecurity. Most Nigerians already have the perception that .ng websites or even the web host companies often deal with security issues.

Sunday Folayan, a reverend and president at Nigeria Internet Registration Association (NiRA) told Business a.m that the decision by most indigenous businesses to host their websites with foreign web hosting companies or not to buy the .ng domain is not far from the fear of insecurity and ignorance.

He explained that most businesses fear hosting their websites on local servers due to their fear of on security and ignorance. “Although we have had heard about some cases where websites in Nigeria were cloned, this kind of news poses fear in them because they are ignorant and not properly informed,” Folayan concluded.

Hosting locally

In contrast to the earlier positions, some players believe that the .ng brand is a gold mine for economic growth while hosting locally also comes with certain advantages.

They argue that one of the significant reasons for Nigerians should start considering hosting locally is the level of latency which is usually low when compared to hosting on foreign web servers.

“Hosting in Nigeria comes with a huge advantage and low latency,” said Lanre Ajayi, chief executive officer, Pinet Technology. If any Nigerian hosts locally the service quality will be better because the website is now closer to the user.

“If you are doing anything that has to do with videos, you are able to stream the video due to the low latency. It is now advantageous to host in Nigeria but the cost difference has to be worked on,” he said.

Similarly, Muhammed Rudman, vice president at NiRA, concurred that hosting of local content with foreign companies has a higher latency level than hosting on local servers with over 100 percent.

He argued that high latency slows data access and increases poor quality of service. Consequently, Internet becomes more expensive due to the distance with end users paying more.

“They take less capacity due to the high cost, a reason why they cannot make good use of it. The process of making payment for data hosting becomes a hassle due to the need to pay in Dollar,” he said.

It is important for the country to understand that data centers have direct and indirect impact on the economy in terms of job creation, tax, and platform for other IT professionals, said Rudman; adding that local hosting provides additional revenue opportunities to local ISPs and data centers which in turn create more job and technical competencies.

Nigeria’s .ng economic potential

The growth of the .ng brand still remains flat compared to other countries potentials like Germany or even South Africa. Nigeria’s .ng domain name growth has been sluggish recording only 106,000 as at June 2018 as against the 100,973 recorded in 2017.

With the Internet subscribers of over 98.3 million users and business population of over 37 million, the analysts believe that the value of .ng domain is great and critical to job creation and poverty reduction. With a business population of over 37 million, .ng has a market potential of over N37 billion annually (assuming an annual renewal price of N1, 000 per .ng domain), according to NiRA.

“The .ng reselling business offers registrars the opportunities to be engaged as earn money for themselves “These are besides the potential businesses from additional registrars and subsequent jobs that will be created.”

Final words

Conclusively, capital flight from Nigeria needs to be curbed in every sector of the economy. The adoption of .ng and hosting servers locally will gather the needed momentum to address the many challenges currently being experienced.

NiRA and other stakeholders must be on their toes to change the ugly narrative, as this will go a long way in reshaping the economy of the country.