Cloud adoption could add N30.2trn to Nigeria’s GDP by 2033

Accelerated adoption of cloud services could generate N30.2 trillion to Nigeria’s GDP over the next ten years, representing 0.36% of Nigeria’s cumulative gross domestic product (GDP). This is according to a report titled: The Contribution of Cloud to Economic Growth, Focus on Nigeria. The report was commissioned by Amazon and carried out by Telecom Advisory Services.

The study revealed that as of 2021, only 27% of organisations in Nigeria adopted cloud computing. This is significantly lower than the adoption rates of 49% in Western Europe and North America. Yet, cloud adoption was still able to make a significant impact on the Nigerian economy, contributing 0.02% to the regional GDP and generating an economic value of N82.9 billion.

Over 71% of this impact can be attributed to the national productivity gains or so-called “spillover effects” on the economy. The remaining 29% is driven by cloud spending from both public and private. There is, therefore, a major opportunity for the country to enhance its cloud penetration and reap substantial benefits. It is, however, imperative that the country accelerate its cloud adoption to maximise this opportunity.

Speaking about the report, the General Manager for Sub-Saharan Africa at Amazon Web Services (AWS), Amrote Abdella, said the report underscores the immense potential for Nigeria, and the Sub-Saharan African region, to harness cloud computing and expedite economic growth.

“With the current forecast, the economic impact of the cloud is undeniable and is poised as a key catalyst for economic prosperity. As such, it is important for businesses in the region to invest in cloud computing technology to stay competitive and boost their economic potential,” she said.

More on cloud adoption improving Nigeria’s GDP

The study further revealed that on average, there is an increase of 0.01 per cent in Nigeria’s GDP for every 1% increase in cloud adoption by Nigerian organizations. However, this is behind South Africa which is the Sub-Saharan African regional leader. In South Africa, a 1 per cent increase in cloud penetration yields a 0.06 per cent increase in GDP.

Extrapolating this data, a 10% increase in cloud penetration across the entire SSA region, would result in economic spillover effects amounting to an estimated USD US$3.8 billion per year. The study demonstrates that the economic impact of cloud computing is guided by returns to scale – greater adoption of cloud computing will lead to proportionally greater productivity gains and economic impact.

According to the Director of the study, Dr. Raul Katz, until recently, research on the economic impact of cloud was focused at the firm level, understanding the microeconomic benefits associated with cloud adoption (for example, capital efficiency, contribution to product development, and the like). The Director of Business Strategy Research at the Columbia Institute for Tele-information (Columbia Business School), said his team was able to develop a new economy-focused approach.

“These studies, while valuable, did not quantify the aggregate effect of cloud on the economy in a similar way to what has been done in areas such as broadband Internet. To address this gap, our team at Telecom Advisory Services developed a state-of-the-art econometric model, leveraging a global series of data on cloud adoption between 2014 and 2021,” he said.

Dr Katz’s report identifies four key advantages of cloud computing: First, is that it enhances business efficiency and effectiveness, streamlining processes and improving outcomes. The second advantage is that it offers access to a wide range of services, enabling businesses to leverage advanced technologies.

The third is that it boosts productivity by facilitating collaboration, mobility, and agility within the workforce; fourth, cloud computing promotes environmental sustainability by reducing carbon emissions per unit of data transmitted.

ICT as a major driver of Nigeria’s economy

Information Technology has risen over the years to become one of the biggest contributors to the country’s GDP. In Q1 2023, Nigeria’s ICT sector contributed N3.1 trillion to Nigeria’s GDP. This represents 17.47 per cent of the total N17.75 trillion realised in the quarter, according to the latest statistics released by the National Bureau of Statistics. This surpassed the figures for the first quarter of 2022 which stood at N2.86 trillion.

Read more: ICT sector contributed 19.54% to Nigeria’s real GDP in Q2 2023

The result was even more impressive in the second quarter of 2023 where ICT activities contributed 19.54% to Nigeria’s real GDP. With the accelerated adoption of cloud services, perhaps the ICT sector might experience a bigger boost.

“By increasing the current average cloud penetration, the region can unlock additional economic value. AWS is committed to supporting its customers and partners in Nigeria throughout their cloud journey. We firmly believe that cloud technology will be crucial in driving innovation, boosting productivity, and scaling businesses in the region over the next decade,” Abdella noted.