N250B USSD Debt: Nigerian Banks at Risk of Losing Telecom Services

The longstanding tension between Nigerian banks and telecom operators over unpaid debts on Unstructured Supplementary Service Data (USSD) services has reached a boiling point. With debts totaling ₦250 billion, telecom operators warn that they may be forced to suspend USSD services to banks, a move that could disrupt millions of financial transactions across the country.

The Growing USSD Debt Problem

The debt crisis stems from services rendered by telecom operators to banks, allowing customers to perform financial transactions without internet connectivity. USSD has become a lifeline for millions of Nigerians, particularly in rural areas with limited access to online banking platforms.

According to Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), while smaller banks have made some payments, tier-one lenders—who owe the lion’s share—have been largely unresponsive.

“We are seeing payments from smaller players, but the big banks, which owe the most, have not been forthcoming,” Adebayo stated, emphasizing the urgent need for intervention by the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC).

The Impact on Telecom Operators

The prolonged debt has placed immense financial pressure on the telecom sector. MTN Nigeria, the largest operator with over 78 million subscribers, revealed losses of ₦519.1 billion in the first half of 2024 due to unpaid USSD fees.

MTN’s CEO, Karl Toriola, warned that the industry is on the brink of collapse:

“The debt has become unsustainable for telecom operators. While we remain hopeful for regulatory intervention, operators may be compelled to discontinue these services if no progress is made. We must return the industry to profitability.”

Telecom operators argue that they are effectively subsidizing banking operations, with no clear path to recovering the costs incurred from providing USSD services.

A History of Disputes and Regulatory Interventions

The conflict over USSD charges dates back to 2019, when telecom operators proposed a fee of ₦4.50 per 20 seconds for USSD usage. Banks opposed the fee, leading to regulatory mediation. In 2021, a ₦6.98 per transaction fee was introduced, but this has done little to address the growing debt.

In 2021, the Minister of Communications and Digital Economy, Isa Pantami, intervened to avert a total shutdown of USSD services. However, despite these efforts, the debt has continued to snowball, threatening the viability of telecom services for financial transactions.

Potential Fallout of USSD Suspension

If telecom operators follow through on their threat to suspend USSD services, the consequences could be severe:

1. Disruption of Financial Services: Millions of Nigerians rely on USSD for basic banking services, including fund transfers, bill payments, and balance checks. A suspension would disproportionately affect those in rural areas without access to internet banking.
2. Economic Instability: With Nigeria’s economy increasingly digitalized, the loss of USSD services could disrupt daily commerce and financial flows.
3. Public Outcry: The potential disruption of critical financial services could lead to widespread public dissatisfaction, putting additional pressure on regulators and policymakers.

Why Regulatory Intervention is Crucial

Stakeholders across the financial and telecommunications sectors have called for immediate regulatory action to resolve the impasse. ALTON has urged the CBN Governor, Olayemi Cardoso, and NCC Executive Vice Chairman, Aminu Maida, to mediate a resolution that safeguards both sectors.

“The financial and digital economy depends on this service. It’s critical for regulators to step in swiftly to ensure resolution,” Adebayo noted.

Challenges in Achieving Resolution

Despite the urgency, several challenges complicate efforts to resolve the debt crisis:

• Lack of Transparency: Banks and telecom operators have been unable to agree on cost-sharing mechanisms for USSD services.
• Regulatory Inertia: Previous interventions have failed to address the root causes of the conflict, resulting in repeated standoffs.
• Economic Strains: Both sectors are grappling with broader economic challenges, including inflation and currency devaluation, which limit their capacity to absorb additional costs.

Way Forward: Collaborative Solutions Needed

Experts argue that resolving the USSD crisis requires a collaborative approach:

1. Debt Repayment Framework: Regulators should establish a clear framework for banks to settle outstanding debts over a fixed timeline.
2. Revised Pricing Model: A transparent pricing model that balances the interests of banks and telecom operators is essential to prevent future disputes.
3. Public-Private Partnerships: Collaboration between the government, banks, and telecom operators can foster a more sustainable ecosystem for digital financial services.

Conclusion: A Ticking Time Bomb

The USSD debt crisis represents a critical test for Nigeria’s digital economy. Failure to resolve the issue could undermine trust in the financial and telecommunications sectors, disrupting the lives of millions of Nigerians.

As ALTON Chairman Gbenga Adebayo aptly put it, “The financial and digital economy depends on this service.” The time for decisive action is now.