Local solutions emerge as exchange rates squeeze tech companies

By Kenneth Oboh

As Nigeria’s tech ecosystem continues to grow, startups are increasingly feeling the pinch of rising cloud infrastructure costs. These essential digital services, typically billed in US dollars by international providers, have become significantly more expensive as the naira continues to fluctuate.

I recently sat down with David Asamu, a cloud architecture expert with over six years of experience working with startups across the fintech industry, to discuss how Nigerian tech companies can navigate this challenging landscape.

Thank you for joining us today, David. Could you start by explaining why cloud infrastructure costs are such a pressing issue for Nigerian startups right now?

Thank you for having me. The primary challenge we’re facing is driven by exchange rates which continue to rise. Major public cloud providers like Google Cloud Platform, AWS, and Microsoft Azure calculate and invoice their services in US dollars.

This creates two major problems for Nigerian businesses: first, they need to source foreign exchange for payments, which is often difficult and expensive; and second, there’s significant uncertainty around the true cost due to currency fluctuations.

How are startups currently dealing with these rising costs?

The current workaround is to look for cloud partners that allow payment in naira. This addresses the need to source forex, which is helpful.

However, exchange rate fluctuations mean that even when paying in naira, costs can still spike unexpectedly. Some providers are offering cloud credits to cushion the effect on customers, but this is just a temporary solution.

What would a more permanent solution look like?

A more permanent solution would involve both the billing and payment of cloud services in naira. Only local providers can offer this arrangement, which is why we’re seeing increased interest in local cloud infrastructure options.

Are there viable local alternatives to the big international cloud providers?

Yes, we have several local providers in Nigeria such as NOBUS Cloud, Mainone’s MDXi, and HostSpace NG. The price difference is significant.

For example, a server with 4 vCPUs, 16GB RAM, and 30GB of disk space would cost about ₦165,000 with AWS or ₦238,000 with Google Cloud at current exchange rates. The same resources from NOBUS would cost just about ₦56,000, and MDXi around ₦64,000. That’s savings of up to 194% compared to AWS or 324% compared to Google Cloud.

If local providers are so much cheaper, what’s stopping Nigerian startups from switching entirely to these services?

There are several obstacles preventing widespread adoption. First, accessibility is an issue – big local providers like Mainone and MTN tend to focus on large corporate clients rather than startups. Second, local providers typically offer limited Platform-as-a-Service options, focusing more on infrastructure. Many startups would benefit from something like “Heroku for Africa” that simplifies deployment.

Other concerns include pricing models that require quarterly or monthly contracts instead of pay-as-you-go options, reliability concerns around availability requirements, and limited managed services, especially for databases, which most teams would rather not handle themselves.

What approach would you recommend for startups trying to balance cost and reliability?

I’m a strong advocate for what I call the “hybrid approach.” This combines the robustness and guarantees of top public clouds with the cheaper compute and storage offered by local vendors.

Essentially, you keep critical components on international providers while moving appropriate workloads to local infrastructure.

How would such a hybrid system work in practice?

We’ve tested configurations where core services remain on major cloud providers, while more resource-intensive but less critical workloads run on local infrastructure.

The systems communicate securely across providers. We’ve conducted performance tests using tools like iPerf3 to measure latency and bandwidth between these environments, and the results have been promising.

Are there any potential downsides to this hybrid approach?

Yes, there are implications to consider. You need to evaluate how performance might be affected in terms of latency and bandwidth. Reliability is another concern – you need to understand how your service level objectives might change.

There are also considerations around compliance, monitoring across multiple platforms, and the added complexity of managing a distributed system. But with proper planning, these challenges can be addressed effectively.

Are there any emerging local solutions that startups should keep an eye on?

Absolutely. HostSpace NG offers managed Kubernetes and container services. NOBUS Cloud has announced a managed container service as well. There’s also Nebula, which is currently in beta but has plans to launch NebDB, a managed database service.

These offerings are evolving to address the exact pain points that make startups hesitant to move away from international providers.

What advice would you give to tech leaders in Nigerian startups who are struggling with cloud costs right now?

First, set up cost monitoring dashboards – you cannot improve what you don’t measure. Implement a continuous optimization loop of analyzing, measuring, and optimizing your cloud usage.

For compute resources, ensure your instances are properly sized for your workloads, consider serverless functions for event-driven tasks, and utilize spot instances for non-critical workloads.

For storage, select cost-effective options based on your access patterns, regularly review and delete unnecessary data, and leverage different storage classes to minimize costs. And don’t be afraid to negotiate – reach out to account managers and ask for better deals, especially if you can commit to usage contracts.

Most importantly, be open to exploring local options as part of a hybrid strategy. The savings can be substantial, and the technology is continuously improving.

Thank you for these insights, David. Where can our readers learn more about optimizing their cloud infrastructure costs?

I write about these topics on my blog at doa.sh, and I’m also active on Twitter as @atechbruv and LinkedIn. For those interested in exploring specific pricing comparisons, I recommend checking out the calculators provided by AWS, Google Cloud, and local providers like NOBUS.

As Nigerian startups continue to navigate economic uncertainties, the evolution of local cloud infrastructure options presents a promising path toward sustainability.

While challenges remain, experts like David Asamu are demonstrating that with strategic planning and a willingness to embrace hybrid approaches, tech companies can significantly reduce costs without compromising on quality.