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Nigerian banks have commenced the repayment of ₦200 billion owed to telecom companies for the use of Unstructured Supplementary Services Data (USSD) banking services. This longstanding debt has caused friction between the banks and telcos for six years, necessitating intervention from both the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC).
Following a meeting in late 2023, a payment plan was established. Sources with direct knowledge of the situation report that banks have started making payments, largely due to pressure from the Central Bank governor, Olayemi Cardoso.
Despite this progress, the pace of repayment remains slow. Gbenga Adebayo, president of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), expressed concerns about the sluggish payments. “If you look at the number, it is not going down,” Adebayo told TechCabal. “The ₦200 billion, which consists of the principal sum and the interest, is likely to rise if the payment continues to drag. We believe that our friends in the banks can do better than what they are doing.”
One source suggested that the banks’ slow repayment is a form of resistance against the telcos. “There was no agreement between the banks and telcos about sharing USSD fees from the beginning. The banks only discovered the telcos were interested in the fees when they started to threaten to cut the service,” said a bank CEO who requested anonymity.
Herbert Wigwe, the late CEO of Access Holdings, previously stated, “There is no such thing as an obligation due from banks to telcos.” Other bank executives have questioned the transparency of the billing process used by telcos to arrive at the debt figure.
In 2023, GTCO’s Segun Agbaje argued that telcos should be responsible for collecting the fees, as they receive the entire ₦6.98 fee per transaction. Regulators, however, have mandated that banks collect and remit these fees to the telcos, a directive that banks seem to be complying with slowly.
USSD technology, initially created by telecom companies to provide airtime and subscription services, quickly became a significant tool for banking. Unlike mobile banking, USSD does not require internet access or smartphones, making it accessible to a broader range of customers. Banks like GTCO heavily promoted USSD services, with transactions reaching ₦5.1 trillion in 2021, though this figure declined to ₦4.4 trillion by 2022.
Despite being the fifth most used payment channel in Nigeria, USSD transactions have the lowest average transfer amount (₦10,000), compared to ₦70,000 for other channels like mobile apps and online transfers, according to National Bureau of Statistics data.
Telcos argue that USSD is crucial for banking and that banks should remit the applicable fees. However, since banks do not profit from USSD transactions and the payment values are relatively small, they are less incentivized to prioritize it. “If you want financial inclusion, then you need to bring down the cost of data. And when you bring down the cost of data, you start to eradicate USSD,” Agbaje argued in 2023.
With increasing security concerns and the ongoing battle against fraud, USSD is becoming less of a priority for Nigerian banks, potentially further delaying debt repayment. “It (the debt) won’t get resolved, so the telcos need to let it go,” said an anonymous banking expert, reflecting a common sentiment among bank executives.
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