The recent announcement that major telecommunications companies in Nigeria, including MTN and Airtel, are set to disconnect the Unstructured Supplementary Service Data (USSD) codes of 18 banks due to a staggering N250 billion debt has sent shockwaves through the financial and telecommunications sectors. This decision, backed by the Nigerian Communications Commission (NCC), poses significant implications for banking operations in Nigeria, particularly for customers who rely heavily on USSD services for transactions.
Background of USSD Services in Nigeria
USSD technology has been a vital component of mobile banking in Nigeria, especially in areas with limited internet access. It allows users to perform various banking functions such as money transfers, checking account balances, and purchasing airtime without needing a smartphone or internet connection. With over 231 million active bank accounts reported as of mid-2024, USSD transactions have become essential for millions of Nigerians.
In the first half of 2024 alone, USSD transactions were valued at approximately N2.19 trillion, indicating the critical role this service plays in the daily financial activities of many citizens. However, despite its importance, the relationship between banks and telecom operators has been fraught with tension over payment disputes related to USSD services.
The Debt Crisis
The current crisis stems from a long-standing disagreement between banks and telecommunications companies regarding the payment for USSD services. Reports indicate that banks owe telecom operators around N250 billion, an amount that has accumulated over several years. The NCC had previously intervened, urging banks to adhere to a repayment plan established in collaboration with the Central Bank of Nigeria (CBN). However, many banks have failed to comply with these directives.
Key Reasons for the Debt
- Service Charges: Banks are charged approximately N6.98 for every USSD transaction they process. This fee is supposed to be remitted to telecom operators, but many banks have been slow or reluctant to settle their debts.
- Regulatory Challenges: The complex regulatory environment surrounding banking and telecommunications has made it difficult for both sectors to reach an amicable resolution regarding payment structures.
- Operational Costs: Banks argue that rising operational costs have made it challenging to pay off their debts while maintaining profitability.
Impending Disconnection
On January 14, 2025, it was reported that the NCC had approved the disconnection of USSD services for 18 banks due to their failure to meet the payment deadlines set by the CBN and NCC. This disconnection is expected to take effect within two weeks, leaving customers unable to access essential banking services via USSD codes.
Affected Banks
The list of banks facing disconnection includes major financial institutions such as:
- First City Monument Bank (FCMB)
- Zenith Bank
- Sterling Bank
- Jaiz Bank
- United Bank for Africa (UBA)
- Polaris Bank
- Wema Bank
- Unity Bank
The NCC has indicated that if these banks do not make significant efforts to address their outstanding debts by the deadline, they will face complete suspension of their USSD services.
Implications for Customers
The impending disconnection of USSD services poses serious implications for bank customers across Nigeria:
1. Disruption of Banking Services
With many customers relying on USSD codes for various transactions, especially those without access to smartphones or reliable internet, this disconnection could lead to significant disruptions in banking operations. Customers may find themselves unable to conduct essential transactions such as:
- Money transfers
- Bill payments
- Checking account balances
- Purchasing airtime
2. Impact on Financial Inclusion
The suspension of USSD services threatens Nigeria’s ongoing efforts toward financial inclusion. Many rural and underserved populations depend on USSD technology due to limited access to traditional banking infrastructure and digital services. The loss of this service could exacerbate existing inequalities in access to financial resources.
3. Increased Pressure on Alternative Channels
As USSD becomes inactive, customers may be forced to rely more heavily on alternative banking channels such as mobile apps or physical bank branches. However, this shift may not be feasible for everyone, particularly those living in remote areas with poor internet connectivity or limited transportation options.
Responses from Stakeholders
In light of this crisis, various stakeholders have begun voicing their concerns and proposing solutions:
Telecommunications Companies
Telecom operators have expressed frustration over the prolonged debt situation and have called for stricter compliance from banks regarding payment agreements. The Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, stated that banks must take responsibility for their debts to ensure uninterrupted service delivery.
Banking Sector Reactions
Bank representatives have acknowledged the challenges posed by rising operational costs but argue that a collaborative approach is necessary to resolve these issues without harming customers. Some banks have reportedly begun making partial payments towards their debts in hopes of averting disconnection.
Government Intervention
The Nigerian government is under pressure to mediate between the banks and telecom operators to find a viable resolution. The NCC has indicated that it may disclose the names of defaulting banks publicly as part of its efforts to encourage compliance and transparency within the sector.
Future Directions
Moving forward, several steps can be taken by both sectors to address this crisis effectively:
1. Establishing Clear Payment Structures
Both banks and telecom operators need to work together to establish clear and fair payment structures that reflect the costs associated with providing USSD services while ensuring sustainability for both parties.
2. Enhancing Communication Channels
Improved communication between stakeholders can facilitate better understanding and cooperation regarding payment obligations and service expectations.
3. Exploring Alternative Solutions
Innovative solutions such as creating a dedicated fund or framework for managing USSD service payments could help alleviate some financial burdens on banks while ensuring telecom operators are compensated fairly.
Conclusion
The impending disconnection of USSD services for 18 banks due to unpaid debts represents a critical juncture for both the telecommunications and banking sectors in Nigeria. With millions of customers relying on these services for everyday transactions, it is imperative that stakeholders come together to find a resolution before the situation escalates further.
As discussions continue regarding potential solutions, it is essential that all parties prioritize customer needs and work collaboratively towards maintaining essential banking services in Nigeria. Failure to do so could not only disrupt individual financial activities but also hinder broader efforts toward achieving financial inclusion across the country.