Outsourcing services in Nigeria's IT sector

The National Information Technology Development Agency (NITDA) held Nigeria’s first National Outsourcing Conference in August 2011. The event marked a major push by Nigeria to carve out space in the business processing outsourcing (BPO) sector. The rationale behind this is clear. BPO firms are major employers in markets like India and the Philippines – a key consideration in Nigeria, where unemployment is roughly 24% – and have driven broader growth in the telecoms sectors of those economies. While BPO in Africa as a whole is more limited, countries including Morocco, Egypt and Ghana are working to gain a larger share of the global market.

As a result, since 2011 NITDA and a handful of other official entities have worked to jump-start the local industry. At the second National Outsourcing Conference in November 2013, David Onu, the head of the Nigeria Association of IT-Enabled Outsourcing Companies (NAITEOC), said that with government support, BPO could become a key source of new jobs for young Nigerians in particular. “With the right policy and necessary infrastructure in place, outsourcing has the potential to create 5m direct and indirect jobs in Nigeria in the next five years,” said Onu. According to NAITEOC, domestic outsourcing alone – in terms of the volume of potential demand from local firms for outsourcing services – could potentially generate up to $8bn annually.

Challenges

To achieve this, Nigeria’s outsourcing industry will have to overcome some well-documented hurdles. For example, a reliable electricity connection is regarded as a prerequisite for BPO firms, many of which operate 24 hours a day in order to respond to clients elsewhere in the world, but currently Nigeria’s grid supply of power is erratic, resulting in high overheads as firms instead rely on their own diesel generators. The country’s data infrastructure – in terms of data and computing centres, as well as security – is also in need of improvement, though several companies have begun construction on data centres in the Lagos area. Yet the government and private sector players agree that Nigeria’s BPO-related strengths outweigh its weaknesses. The country is home to a large, young, tech-literate and English-speaking population, with competitive wage structures and sizable bandwidth availability.

Official Backing

In the Federal Ministry of Communication Technology’s (FMCT) National ICT Policy, a final draft version of which was introduced in August 2012, the government laid out objectives for the development of domestic outsourcing. These included financing ICT infrastructure development in support of the sector, promoting education and training among the youth population and ICT workforce, and providing tax and other incentives to private firms that are active in the industry. These goals were developed in an effort to address the sector’s “lack of a robust framework, security concerns [and] perceived lack of local skills”, which together have “prevented Nigerian organisations from participating effectively in, and benefitting from”, the BPO segment, according to the policy document.

To help address some of these challenges, the government has launched a number of initiatives, including NAITEOC, which was established in July 2013 with an N20m ($122,000) grant from NITDA and in conjunction with a variety of other public and private stakeholders. The organisation has a mandate to oversee the development of Nigeria’s BPO sector. As of early 2014 NAITEOC was reportedly in the process of drawing up a long-term plan for the sector, which will likely include a raft of new policies and, potentially, organisations aimed at encouraging Nigerians to set up new companies in this area.

Additionally, in 2013 the FMCT launched the Naija Cloud initiative, which is focused on boosting awareness among the domestic workforce of new opportunities in online outsourcing in an effort to create demand for new jobs. The ministry hosted a workshop in 2013, which involved training 2000 Nigerians on how to use online job platforms, with a focus on finding outsourcing and “micro-work” jobs, the latter of which involve carrying out simple online tasks repeatedly for a nominal fee. According to the FMCT, more than 50,000 Nigerians regularly earn money performing such tasks.

Under the Naija Cloud initiative the FMCT is also working to facilitate a partnership with the US-based Rockefeller Foundation’s Digital Jobs Africa initiative, which aims to catalyse “ICT-enabled employment opportunities and skills training for high potential but disadvantaged African youth”. The Rockefeller Foundation is already active in this area in several African countries. If the partnership moves forward, the FMCT plans to carry out Naija Cloud workshops and related activities across all 36 Nigerian states and the Federal Capital Territory. “As cloud computing continues to expand, so will the number of domestic data centres,” Karam Chaktoura, the managing director of Integrated Power Technologies, told OBG.

There is scope for the government itself to become a client of BPO firms. According to Onu, between 2009 and 2013 the federal government spent more than $1.2bn on paperwork, much of which could have likely been avoided through domestic outsourcing and the digitisation of government documents. Most government ministries and departments operate on the state-run Galaxy Backbone shared data platform, which provides many of the same capabilities as a privately run ICT outsourcing firm, though arguably less efficiently and at a higher cost. In recent years there have been signs that this may be changing. In 2008 the Lagos State government established Nigeria’s first emergency contact centre. The facility, which handled 50m emergency phone calls in 2012, is operated by Contact Solutions (ConSol), a Lagos-based outsourcing company.

Private Sector

While Nigeria’s ICT-enabled outsourcing segment remains relatively underdeveloped, a handful of companies have established a presence. ConSol, which was established in 2002, operates contact centres and provides other BPO services. In addition to the Lagos State government, ConSol’s clients include major domestic corporates, such as Skye Bank, and a handful of multinationals, such as Proctor & Gamble and British American Tobacco. Additionally, in November 2013 ConSol won a tender put forward by the FMCT to build and operate an information contact centre for the federal government in Lagos. The facility will employ more than 100 people. Like Onu, ConSol’s managing director and CEO, Abiodun Adeoye, has said that the federal government represents a major potential source of business for Nigerian outsourcing.

However, ConSol is far from the only player. Other corporates that are either currently providing ICTenabled BPO services in Nigeria or are in the process of setting up shop in this area include iWayAfrica, a Mauritius-based ICT services company that is active in markets across the continent, and Resource Intermediaries, a Lagos-based outsourcing firm.

In March 2014 Etisalat Nigeria, the country’s fourth-largest mobile network operator, announced that it had signed a deal with Huawei, under which the Chinese original equipment manufacturer would be responsible for managing most of the technical aspects of Etisalat’s telecoms network and operations in Nigeria. An instance of technical outsourcing on a scale not seen before in the country, the agreement has the potential to serve as an example of the benefits of outsourcing operations even in core competency areas. As a result of outsourcing much of its technical operations, Etisalat will be able to focus on its long-term strategies, developing new products and governance. “There will be radical changes with the signing of this agreement,” Matthew Willsher, the acting CEO of Etisalat Nigeria, said at the announcement of the deal. “There will be improved quality of service. There will be more in mobile health, education and mobile money.”

Competitive

Nigeria is not the only country in sub-Saharan Africa working to develop a domestic ICT-enabled outsourcing industry. In recent years authorities in Ghana, Kenya and South Africa, as well as Francophone markets such as Morocco, Côte d’Ivoire and Senegal, have moved to map out longterm strategies in this area. Kenya’s government has been working to develop the industry since the mid2000s, and the sector now includes hundreds of firms offering a variety of services, for example.

In terms of attracting international outsourcing, Nigeria must also eventually compete with global leaders like India. In 2012 some 2.8m Indians were employed in the industry, and outsourcing brought in revenue of around $11bn, equal to 1% of the country’s GDP. Nigerian authorities cite these figures as an example of the sector’s potential. “India makes more money [from outsourcing] than what Nigeria makes in oil,” said Daura Ashiru, the director of software outsourcing at NITDA, said in April 2013. “And we are more advantageous than India in this area.”