Amazon Web Services, Inc. (AWS), an Amazon.com, Inc. company (NASDAQ: AMZN), commissioned a new report quantifying the relationship between public cloud computing adoption, national productivity, and economic growth in Nigeria. The report highlights the potential for the Nigerian market to unlock NGN30.2 trillion of additional economic value over the next decade (2023-2033), representing 0.36% of Nigeria’s cumulative gross domestic product (GDP) by accelerating adoption of cloud.
The study, performed by Telecom Advisory Services LLC, and directed by Raul Katz, Director of Business Strategy Research at the Columbia Institute for Tele-information (Columbia Business School), provides a cutting-edge econometrical method for calculating the aggregate productivity gains realized by economies that adopt cloud computing. It extends previous economic research focused on firm-level productivity by establishing cloud adoption as a driver of national productivity and economic growth.
Unleashing the Economic Power of Cloud Computing in Nigeria.
In 2021, cloud adoption made a significant impact on the Nigerian economy. According to the report, cloud adoption contributed 0.02% to the regional GDP, generating an economic value of NGN 82.9 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
organisations.
On average, Nigeria experienced a 0.01% increase in GDP for every 1% increase in cloud adoption by Nigerian organizations. This is behind the SSA regional leader, South Africa, where a 1% increase in cloud penetration yields a 0.06% 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.
Dr. Katz explains: “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). 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 global series of data on cloud adoption between 2014 and 2021.”
Amrote Abdella, General Manager for Sub-Saharan Africa at AWS, said: “This report underscores the immense potential for Nigeria, and the SSA region, to harness cloud computing and expedite economic growth. 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.”
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.
In 2021, only 27% of organisations in Nigeria adopted cloud computing, significantly lower than the adoption rates of 49% in Western Europe and North America. This presents an opportunity for the country to enhance its cloud penetration and reap substantial benefits.
“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,” added Abdella.
The report identifies four key advantages of cloud computing: First, it enhances business efficiency and effectiveness, streamlining processes and improving outcomes; second, it offers access to a wide range of services, enabling businesses to leverage advanced technologies; third, 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.
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