With rising demand and a clear policy direction, Nigeria’s data centre construction wave appears poised to intensify, delighting investors eager to capitalise on future infrastructure opportunities. However, efforts to deepen the investment are hampered by the high costs of land, construction, and electricity, VICTOR GBONEGUN reports.

The booming construction of data centres across Nigeria is drawing increased investor interest as surging Internet use, fintech expansion, and government digitisation fuel demand for secure, local data infrastructure.

From Lagos to Abuja, developers and global tech giants are racing to plug Nigeria’s data deficit with modern facilities designed to store, process, and deliver digital content more efficiently. Investors are excited, seeing data centres not just as technological assets, but as high-yield infrastructure projects with long-term income potential.

According to industry analysts, Nigeria hosts less than 10 per cent of the data storage it consumes. Most of the country’s internet traffic is routed through Europe, increasing latency, operational costs, and cyber risk. But with new investments from global players like Equinix, which acquired MainOne, and the expansion of Rack Centre and Kasi Cloud, the tide is turning.

Beyond their digital value, data centres are also prized for their real estate and energy play. Built on secure plots and demanding stable electricity, often backed by renewable sources, they offer attractive opportunities to developers, construction firms, and energy providers. Some centres are co-located with solar or gas plants to guarantee 24/7 uptime.

The Federal Government’s data localisation policy, which encourages sensitive data to be hosted within national borders, has further bolstered investor confidence. Several states are also offering tax breaks and public-private partnership models to attract data infrastructure.

With a projected market expected to reach $671 million by 2030 at a compound yearly growth rate of 15.82 per cent, the sector is attracting substantial investments in new facilities construction and expansion of existing ones. By 2028, the Nigerian data centre market is expected to have grown from its 2022 valuation of $230 million to $415 million.

The data centre construction market in Nigeria is expected to reach $578.1 million by 2029, from the $251.13 million value reported as of 2024.The market is experiencing a significant shift towards higher-tier facilities to complement Tier 1, Tier 2, Tier 3 and Tier 4 centres. The Guardian gathered that this trend reflects the industry’s focus on future-ready infrastructure capable of supporting advanced technologies and the government’s target of attaining a $1 trillion economy.

Data centre construction gained traction a few years after the outbreak of the COVID-19 pandemic, which forced many firms to switch to virtual platforms and related options for continuing work. The increase in the use of smartphones and tablets as preferred devices to access the Internet and increased online transactions, which rose to about N12 billion through different media and platforms, contributed to data traffic in the country and the need to construct data centres.

Core components of a data centre construction site include computing resources, storage systems, power supply units and network infrastructure, which together ensure efficient data processing and transmission. Comprehensive infrastructure for a data centre includes cabling for power and data transmission, cooling systems to maintain optimal temperature, backup power supplies to ensure uninterrupted operation, fire suppression systems to protect against emergencies and security measures to safeguard sensitive data.

Lagos, the commercial nerve centre of Nigeria is witnessing strong momentum in such constructions with the majority of data centre construction in Nigeria sited in the city. Findings revealed that in the past six years, Nigeria’s major city locations have recorded a total of 14 data infrastructure constructions amid increasing demands.

The facility provides a secure and reliable environment for storing and processing data, enabling organizations to scale their IT infrastructure to meet growing demands Some of the locations where the construction is sited include the Lagos axis of Eko Atlantic City, Lekki, Ikoyi, Oregun, Ikorodu, Victoria Island, Magboro area of Ogun State, and Abuja, the Federal Capital Territory (FCTA).

Sources told The Guardian that key factors considered when constructing a data centre are the ground’s stability and soil quality to ensure the site can handle the weight of all the equipment without sinking or shifting. “The cooling infrastructure, water availability and proximity to major internet hubs are crucial. Building a data centre in a disaster-prone area can lead to big problems, from infrastructure damage to costly repairs.”

A study by North court Real Estate highlighted that although there are more than 11 data centres in Nigeria, there is a $600 million capacity shortfall nationwide. Despite the growth, there is still a need for further investment to meet the growing digital infrastructure demands. Data centre market intelligence firm, DC Byte, noted that Nigeria ranks second in Africa for total data centre capacity, at 145 MW with 21 per cent of the market capacity fully fitted out; far behind South Africa’s 408 MW, thereby highlighting the current gap in digital infrastructure.

Firms like Citidata Centre plan to establish five additional facilities all of which are expected to be operational by 2027, while governments at both federal and state levels are also strategising towards the construction of data centres to improve digital infrastructure and promote socio-economic development.

However, investment in data centre construction is often hampered by challenges, especially high construction and high energy costs. The development costs of a data centre can be significant, making it up to 5 to 10 times more expensive than an equivalent office building in the commercial real estate sector. Supply chain disruptions can also delay project timelines and increase costs of critical components like semiconductors, storage devices, cooling systems and backup generators.

Also, energy efficiency is a critical consideration for data centres. High energy demands could lead to significant operational costs and environmental concerns.

But effective data centre energy management is essential for reducing operational costs and environmental impact, hence, data centres are increasingly adopting innovative solutions like liquid cooling and free cooling, which leverage outside air to cool servers.

According to a report by PricewaterhouseCoopers International Limited (PwCIL), entitled: ‘Data Centres at the Crossroads of Technology and Resilience’, rising demand and competition are driving up land costs and complicating strategic data site selection, making strategic business relationships, joint ventures and merger and acquisition essential for capturing value.

The report also highlighted practical strategies for navigating these challenges should include holistic site feasibility, future-proofing energy costs through scenario modelling and integrating renewable energy sources.

Currently, some real estate firms are exploring this investment and involved in development, investment, or providing specialised services. One of such is Actis which has invested in Rack Centre. Essentially, Gateway Real Estate Africa (GREA) recently developed a data centre in Eko Atlantic City for Africa Data Centres. Others like CBRE Excellerate provide services like facilities management for such facilities.

Industry experts emphasised that there are strong opportunities for investors in the data market as the investment climate becomes increasingly friendly.

One of the developers of a data centre in Lagos, Dr Ayotunde Coker, expressed concerns about the cost of construction, revealing that the one-megawatt capacity of a data centre could cost as much as $10 million.

Coker, who is the Chief Executive Officer of Open Access Data Centre (OADC), a subsidiary of WIOCC Group, noted that it has committed an additional $240 million in investment to expand its data centre in Lagos. To him, securing reliable power is one of the biggest challenges for hyperscale data centres.

With its data centre located in Lekki axis, he said plans are on, to upgrade the data centre to 24 megawatts by 2027, to serve as the landing station for Google’s Equiano subsea cable in Nigeria.

Coker disclosed that the firm has developed a multi-faceted energy strategy to address this challenge, integrating traditional and renewable energy sources for the long-term sustainability of the facility.

An engineer, Dr Uche Obiajulu, attributed the increased construction of data facilities to the awareness of its importance for economic development, adding that the awareness has triggered the zeal for requests and construction of more facilities.

He argued that investors have also seen that there is an increase in patronage for data centres, hence they can conveniently invest more funds. “Unlike before, regulations for the construction of data centres are more relaxed. In the past, getting a license may have taken two years. Now, it is quicker and faster and easier for people to invest. The value of foreign exchange is also more stable now than before. So, it is easier to recoup your investment,” he said.

In terms of design, he highlighted that it has improved especially now that there is competition in designs, block-chain and the hardware used for construction because there are options.

According to Obiajulu, the data centre market will continue to experience an upward trajectory. An estate surveyor and valuer, Akin Opatola, said locations such as Lagos, Abuja, and Port-Harcourt are emerging as major cities attracting investment in data centres. Opatola, who doubles as President International Real Estate Federation (FIABCI-Nigeria), said although the investment has its challenges such as the FX risks, huge energy costs and cooling demand.

He disclosed that data centres are a new disruptive area of real estate with Nigeria’s demography accounting for a highly youthful population of close to about 90 million, who have limited access to internet infrastructure but huge demand for data. Opatola noted that there are Chinese investors too, who are looking at investment opportunities in Lagos.