Nigeria’s telecom operators are currently engaging with the Nigerian Communications Commission (NCC) to seek regulatory approval to withdraw Unstructured Supplementary Service Data (USSD) services from banks, driven by an outstanding debt that has proliferated beyond N250 billion over the last six years. This situation has been a point of contention that has spurred various interventions, notably from the Central Bank of Nigeria during Godwin Emefiele’s tenure and the former Minister of Communications, Isa Pantami. Despite these efforts, a definitive resolution has remained elusive, leaving telecom operators increasingly frustrated. The USSD service, originally introduced by telecom providers for its ease of use in handling banking transactions without an internet connection, has become a critical component for many banking applications, thus exacerbating the conflict between banks and telecom operators.
The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has highlighted that banks have been benefiting from USSD services without fulfilling their financial obligations. ALTON Chairman Gbenga Adebayo expressed that normally, these types of issues would follow standard commercial dispute resolutions; however, political interests have complicated the matter, making the involvement of regulatory authorities necessary for any action to be taken. The ongoing delay in collecting this significant debt is a concerning reality that Adebayo underscored, stressing the importance of resolving this issue promptly. The debt, which was reported at N80 billion in November 2022, escalated to N120 billion by April 2023 and now exceeds N250 billion, emphasizing the severity of the situation.
Despite the increasing debt, some banking executives have questioned the telecom operators’ claims regarding the amount owed. Previous leaders such as the late Herbert Wigwe of Access Holdings and Segun Agbaje of Guaranty Trust Holding Company have raised concerns about the debt figures presented by telecom operators. Adebayo clarified that while banks do not dispute their indebtedness, the core issue lies in the contested amount. He argued that banks, if placed in a similar position with a debtor, would take action without concern for the quantity of debt. The existence of a clear contractual obligation highlights the need for banks to fulfill their payments, as a debtor should acknowledge their financial responsibilities regardless of the debt size.
The potential cancellation of USSD services poses serious ramifications for banking operations in Nigeria, drawing attention to the interconnectedness of the telecommunications and banking sectors. Ejike Onyeaso, a director at Adaba Consult, pointed out that the use of leased lines by banks without adequate compensation to telecom service providers is a root cause of the issue. Telecom operators demand fair compensation for the revenue generated by banks through USSD services, underscoring that the financial sustainability of the telecommunications industry is at stake. The threat of telcos withdrawing USSD services could result in significant disruptions for banking operations, potentially causing systemic risks for the financial system.
Onyeaso emphasized the necessity for dialogue between the parties involved to reach a resolution, arguing that despite differing perspectives, banks cannot deny the necessity of USSD services for their operations. He urged that if banks perceive these services as unnecessary, they should allow telecom operators to withdraw them. This sentiment encapsulates the broader issue of fair trading practices within the Nigerian economy, where service providers deserve their compensation for services rendered. The ongoing conflict between the two sectors highlights a significant imbalance that needs to be rectified through meaningful negotiation, clear communication, and adherence to contractual obligations.
In light of these concerns, industry leaders are hopeful for a productive resolution. MTN’s CEO, Karl Toriola, expressed optimism regarding the ability of new players in both the Central Bank of Nigeria and the NCC to mediate and potentially resolve the growing strife between telecom operators and the banking sector. He indicated that, if the situation remains unresolved, telecom operators will have no alternative but to seek regulatory approval to discontinue allowing banks to utilize USSD channels for transactions. This outcome would have pervasive consequences for the banking sector, amplifying calls for a dialogue that addresses the underlying financial disputes while preventing operational disruptions across critical sectors in Nigeria. The urgency of resolving this matter becomes paramount to ensuring the stability and efficiency of services across the telecommunications and banking landscape.
