Media reports indicated that the imminent deactivation of USSD services
in Nigeria within two weeks is due to a protracted financial
dispute between telecommunications operators and deposit money banks
(DMBs) which revolves around unpaid debts totaling an
alarming N250 billion. This financial impasse has lingered for several
years, despite regulatory interventions from the Central Bank of Nigeria
(CBN) and the Nigerian Communications Commission (NCC). The failure of
most banks to comply with payment directives has now prompted telecom
operators to issue a final warning, signaling the potential suspension
of a service that is vital to millions of Nigerians.
USSD, or Unstructured Supplementary Service Data, is a technology that allows bank customers to perform financial transactions without needing internet access. It uses shortcodes to enable users to transfer funds, pay bills, and purchase airtime directly from their phones. Initially designed to promote financial inclusion in rural areas with low internet penetration, the service has since gained widespread adoption across Nigeria. As of mid-2024, USSD accounted for a significant portion of mobile banking, with transactions valued at N2.19 trillion from 252.06 million transactions in just six months. However, this figure represents a notable decline from the N4.84 trillion reported during the same period in 2023, highlighting the growing challenges within the system.
The ongoing dispute dates back to 2019, when disagreements arose over who should bear the costs of USSD services for financial transactions. Banks proposed a model where end-users would be billed directly, a suggestion that telecom operators opposed, citing risks of double billing and regulatory issues. By August 2020, unpaid USSD charges had grown to N17 billion and have since ballooned to N250 billion by December 2024. This debt has strained relationships between the banking and telecom sectors, with each side blaming the other for the failure to resolve the issue.
Efforts to mediate the conflict have been extensive but largely unsuccessful. A joint directive issued by the CBN and NCC on December 20, 2024, outlined measures to clear the debts and establish payment timelines. The directive required banks to pay 60 percent of outstanding pre-API invoices by January 2, 2025, as full and final settlement, while the balance was to be cleared by July 2, 2025. For post-API invoices issued after February 2022, 85 percent was to be paid by December 31, 2024, with a commitment to settle future invoices within one month of issuance. Despite these stipulations, only four banks have made substantial payments, while 18 have failed to meet the requirements.
Telecommunications operators have grown increasingly frustrated with the banks’ non-compliance. According to sources within the telecom industry, the NCC has already approved the suspension of USSD services, giving a two-week notice to prepare subscribers for the service’s potential shutdown. Should the banks continue to default on their obligations, telecom operators are prepared to deactivate USSD codes altogether. This move would have far-reaching implications for Nigeria’s financial ecosystem and its broader digital economy.
The suspension of USSD services threatens to disrupt banking operations for millions of Nigerians. By July 2024, the number of active bank accounts in the country had surged to 231.1 million, up from 151 million in 2022. Of these accounts, a substantial proportion is linked to USSD-enabled transactions. An estimated 70 million Nigerians rely on USSD for financial services, many of whom live in rural areas and depend on basic feature phones. These users would be disproportionately affected by a suspension, as alternative digital banking options often require internet connectivity and smartphones.
The broader economic and social consequences of a USSD suspension are significant. Nigeria’s financial inclusion drive, aimed at integrating underserved and unbanked populations into the formal banking sector, could suffer a severe setback. USSD has been instrumental in bridging the digital divide by offering affordable and accessible financial services to marginalized groups. Its deactivation would create barriers for small businesses and individuals who rely on quick, cost-effective mobile transactions.
The payment model for USSD transactions has been another contentious issue. Banks currently charge N6.98 per transaction, a fee that is meant to be remitted to telecom operators. However, there are no clear guidelines on when these payments should be transferred, leading to delays and disputes. Telecom operators argue that the non-payment of these fees has hindered investments in USSD infrastructure and slowed the expansion of mobile network services. The failure to resolve this revenue-sharing dispute has contributed to the mounting debt and deteriorating relations between the two industries.
The stakes in this conflict are high for both telecom operators and banks. While telecom companies have invested heavily in the infrastructure that powers USSD services, banks depend on these services to reach customers in remote areas and enhance their digital banking offerings. The suspension of USSD would represent a significant setback for both sectors, undermining customer trust and potentially leading to revenue losses.
Regulatory bodies like the CBN and NCC have faced criticism for their handling of the dispute. Industry observers note that clearer regulatory frameworks and stricter enforcement mechanisms could have prevented the current crisis. The failure to establish transparent and enforceable payment terms has created an environment where conflicts fester without resolution. Moving forward, stronger regulatory oversight will be necessary to restore confidence and ensure the sustainability of USSD services.
The looming suspension also raises broader questions about the future of financial technology in Nigeria. As digital banking continues to evolve, the need for robust infrastructure, equitable revenue-sharing models, and effective regulation will become even more critical. Policymakers must balance the interests of all stakeholders to foster innovation while protecting consumer access to essential financial services.
USSD, or Unstructured Supplementary Service Data, is a technology that allows bank customers to perform financial transactions without needing internet access. It uses shortcodes to enable users to transfer funds, pay bills, and purchase airtime directly from their phones. Initially designed to promote financial inclusion in rural areas with low internet penetration, the service has since gained widespread adoption across Nigeria. As of mid-2024, USSD accounted for a significant portion of mobile banking, with transactions valued at N2.19 trillion from 252.06 million transactions in just six months. However, this figure represents a notable decline from the N4.84 trillion reported during the same period in 2023, highlighting the growing challenges within the system.
The ongoing dispute dates back to 2019, when disagreements arose over who should bear the costs of USSD services for financial transactions. Banks proposed a model where end-users would be billed directly, a suggestion that telecom operators opposed, citing risks of double billing and regulatory issues. By August 2020, unpaid USSD charges had grown to N17 billion and have since ballooned to N250 billion by December 2024. This debt has strained relationships between the banking and telecom sectors, with each side blaming the other for the failure to resolve the issue.
Efforts to mediate the conflict have been extensive but largely unsuccessful. A joint directive issued by the CBN and NCC on December 20, 2024, outlined measures to clear the debts and establish payment timelines. The directive required banks to pay 60 percent of outstanding pre-API invoices by January 2, 2025, as full and final settlement, while the balance was to be cleared by July 2, 2025. For post-API invoices issued after February 2022, 85 percent was to be paid by December 31, 2024, with a commitment to settle future invoices within one month of issuance. Despite these stipulations, only four banks have made substantial payments, while 18 have failed to meet the requirements.
Telecommunications operators have grown increasingly frustrated with the banks’ non-compliance. According to sources within the telecom industry, the NCC has already approved the suspension of USSD services, giving a two-week notice to prepare subscribers for the service’s potential shutdown. Should the banks continue to default on their obligations, telecom operators are prepared to deactivate USSD codes altogether. This move would have far-reaching implications for Nigeria’s financial ecosystem and its broader digital economy.
The suspension of USSD services threatens to disrupt banking operations for millions of Nigerians. By July 2024, the number of active bank accounts in the country had surged to 231.1 million, up from 151 million in 2022. Of these accounts, a substantial proportion is linked to USSD-enabled transactions. An estimated 70 million Nigerians rely on USSD for financial services, many of whom live in rural areas and depend on basic feature phones. These users would be disproportionately affected by a suspension, as alternative digital banking options often require internet connectivity and smartphones.
The broader economic and social consequences of a USSD suspension are significant. Nigeria’s financial inclusion drive, aimed at integrating underserved and unbanked populations into the formal banking sector, could suffer a severe setback. USSD has been instrumental in bridging the digital divide by offering affordable and accessible financial services to marginalized groups. Its deactivation would create barriers for small businesses and individuals who rely on quick, cost-effective mobile transactions.
The payment model for USSD transactions has been another contentious issue. Banks currently charge N6.98 per transaction, a fee that is meant to be remitted to telecom operators. However, there are no clear guidelines on when these payments should be transferred, leading to delays and disputes. Telecom operators argue that the non-payment of these fees has hindered investments in USSD infrastructure and slowed the expansion of mobile network services. The failure to resolve this revenue-sharing dispute has contributed to the mounting debt and deteriorating relations between the two industries.
The stakes in this conflict are high for both telecom operators and banks. While telecom companies have invested heavily in the infrastructure that powers USSD services, banks depend on these services to reach customers in remote areas and enhance their digital banking offerings. The suspension of USSD would represent a significant setback for both sectors, undermining customer trust and potentially leading to revenue losses.
Regulatory bodies like the CBN and NCC have faced criticism for their handling of the dispute. Industry observers note that clearer regulatory frameworks and stricter enforcement mechanisms could have prevented the current crisis. The failure to establish transparent and enforceable payment terms has created an environment where conflicts fester without resolution. Moving forward, stronger regulatory oversight will be necessary to restore confidence and ensure the sustainability of USSD services.
The looming suspension also raises broader questions about the future of financial technology in Nigeria. As digital banking continues to evolve, the need for robust infrastructure, equitable revenue-sharing models, and effective regulation will become even more critical. Policymakers must balance the interests of all stakeholders to foster innovation while protecting consumer access to essential financial services.
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