The Unstoppable Rise of USSD Transactions in Nigeria’s Financial Landscape
The first half of 2024 has witnessed a surge in the adoption of Unstructured Supplementary Service Data (USSD) for financial transactions in Nigeria. The Central Bank of Nigeria (CBN) reports an astounding 252.06 million USSD transactions, totaling N2.19 trillion, between January and June 2024. This impressive figure represents a significant portion of the total USSD transactions recorded in the entire year of 2023, accounting for 45.3% of the total value and 40% of the total volume. This rapid growth underscores the increasing reliance on USSD as a preferred method for financial transactions, particularly in a nation striving for greater financial inclusion. While other electronic payment methods, such as ATMs and POS terminals, also contribute significantly to the cashless ecosystem, USSD’s unique accessibility makes it a pivotal driver of financial inclusion, especially in underserved communities.
USSD’s strength lies in its simplicity and accessibility. Unlike internet-based banking, USSD transactions do not require internet connectivity, making them ideal for users in areas with limited or unreliable internet access. This has proven invaluable in Nigeria, where vast swathes of the population, particularly in rural areas, lack consistent internet access. The ease of use, combined with accessibility, has positioned USSD as a cornerstone of Nigeria’s financial inclusion strategy, empowering millions to participate in the formal financial system. By bridging the digital divide, USSD facilitates basic financial services, including money transfers, bill payments, and airtime purchases, for individuals who would otherwise be excluded. This accessibility has significantly contributed to the growth of the digital economy and broadened financial inclusion across the country.
However, the remarkable success of USSD in Nigeria is overshadowed by a long-standing debt crisis. Telecommunication operators (telcos) are owed over N250 billion by banks for providing USSD services. This debt, accumulated over the past six years, has become a major point of contention between the telcos and the banks. Despite several interventions by the CBN under former Governor Godwin Emefiele and the former Minister of Communications, Isa Pantami, a lasting solution remains elusive. This simmering dispute threatens the sustainability of USSD services and casts a shadow over the future of this crucial financial inclusion tool. The failure to resolve this financial impasse could potentially disrupt the provision of USSD services, impacting millions of Nigerians who rely on this platform for their financial transactions.
The Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, has voiced concerns about the banks profiting from USSD services without fulfilling their financial obligations. While reports suggest that some smaller banks have begun to settle their debts, the major, tier-one banks, who hold the bulk of the debt, are yet to make significant payments. This selective repayment further complicates the issue and highlights the disparity between the smaller and larger players in the banking sector. The continued delay in full debt repayment raises concerns about the commitment of the major banks to the sustainability of the USSD platform and its role in financial inclusion.
Amidst the debt controversy, other electronic payment channels are also experiencing considerable growth. ATM transactions recorded a staggering N12.21 trillion in the first half of 2024, spanning 496.44 million transactions. This highlights the increasing use of ATMs for cash withdrawals and other banking services. Similarly, POS transactions have also witnessed substantial growth, further reinforcing the ongoing transition towards a cashless economy. These parallel developments indicate a dynamic and evolving financial landscape where various electronic payment methods coexist and cater to diverse customer needs. While these other channels offer alternative options, the unique accessibility of USSD continues to make it an essential component of the financial ecosystem, particularly for those with limited access to traditional banking services.
The future of USSD in Nigeria hinges on resolving the lingering debt crisis. The sustained growth and increasing reliance on this vital service underscore the urgency of finding a lasting solution. A successful resolution would not only ensure the continued availability of USSD services but also strengthen the foundation for a more inclusive and robust digital economy. Failure to address this issue could jeopardize the progress made in financial inclusion and hinder the development of a truly cashless society. The government, regulators, and industry stakeholders must collaborate to find a sustainable solution that ensures the long-term viability of USSD services and safeguards the financial interests of all parties involved. Only then can Nigeria fully realize the transformative potential of USSD in driving financial inclusion and promoting economic growth.
