The ongoing conflict between Nigerian banks and telecommunications companies over a $103 million USSD debt is poised to escalate.
In June 2020, the value of USSD transactions in Nigeria was ₦390 billion ($1 billion), with a significant portion attributed to banks. Guaranty Trust Bank (GTB) alone reported ₦3.89 trillion in transaction value for 2020.
USSD, a protocol enabling SIM-based communication with bank servers via text messages, is crucial for banks offering various services. However, the cost of SMS and the massive volume of transactions has sparked a dispute over payment responsibilities dating back to 2019.
The $103 Million Conundrum
In December 2019, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) threatened to terminate USSD services due to a $103 million debt. ALTON claimed that for two years, neither banks nor customers paid for USSD use.
Following lengthy negotiations, the cost of USSD transactions was set at N6.98, with the Central Bank of Nigeria (CBN) and the Communications Commission mandating that users bear the charges.
A joint statement from the CBN and NCC clarified, “To ensure transparency, the new USSD charges will be deducted directly from customers’ bank accounts on behalf of the telcos. Banks must not impose additional charges for USSD use.”
This clarification is significant as telcos initially requested that banks, the primary service providers, cover the costs.
Central Bank Governor Godwin Emefiele opposed this, stating, “Banks will not allow this to happen; they are the source of business for telecom companies.”
Emefiele further urged banks to seek telecom providers offering USSD services at minimal or no cost, reinforcing the stance that the status quo must change.
A Standoff Between Banks and Telcos
During a recent investor call, Access Bank CEO Herbert Wigwe echoed the CBN governor’s position, asserting that banks owe no obligations to telcos.
“There is no obligation from banks to telcos,” Wigwe stated. “We chose to avoid public confrontation with telcos as it is inappropriate.”
Wigwe emphasized that while telcos continue to provide USSD services, the responsibility lies with customers to cover the costs. He highlighted that, for two years, banks allegedly charged customers for USSD services without remitting payments to telcos.
ALTON Chairman Gbenga Adebayo described the issue as a moral obligation, questioning the deductions made from customers and emphasizing the growing debt, which had escalated from ₦42 billion in January to ₦45 billion by the time of discussions.
Adebayo indicated that settlement terms were still under negotiation, potentially altering the future dynamics between banks and telcos.
CBN Steps In Again
Recently, MTN Nigeria subscribers faced difficulties purchasing airtime via bank apps or USSD channels, following MTN’s decision to reduce commission on airtime purchases from 4.5% to 2.5%. While major banks resisted this change, challenger banks like Kuda Bank continued to support MTN subscribers, highlighting competitive pressures.
The CBN intervened once more, resulting in MTN reversing its commission cut. The irony lies in the CBN advocating for banks to seek cheaper USSD alternatives while simultaneously ensuring telcos maintain bank-favorable pricing.
