Banks, telcos’ N120bn debt issue threatens FG’s financial inclusion drive

The yet to be resolved N120billion Unstructured Supplementary Services Data (USSD) debt issue between the commercial banks in the country and the telecom operators is again threatening the financial inclusion drive of the federal government.  Earlier in 2020, the federal government’s drive to get more than half of Nigeria’s population to have bank accounts or at […]

The yet to be resolved N120billion Unstructured Supplementary Services Data (USSD) debt issue between the commercial banks in the country and the telecom operators is again threatening the financial inclusion drive of the federal government. 

Earlier in 2020, the federal government’s drive to get more than half of Nigeria’s population to have bank accounts or at least contribute to financial flow through mobile banking was threatened by disagreement between banks and telecommunications companies over Unstructured Supplementary Service Data (USSD) debt.

Also, in March 2021, telecom operators in the country announced that they would stop the use of the Unstructured Supplementary Service Data (USSD) by banks and other financial institutions in the country.

Telecommunications operators under the aegis of the Association of Licensed Telecommunications Operators of Nigeria (ALTON) had in May informed the telecom users that the Nigerian Communications Commission (NCC) had granted an approval for its members to disconnect Deposit Money Banks (DMBs) if they fail to pay the N120bn debt owed to operators for (USSD) services.

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In statement signed then by the Chairman of ALTON, Engr, Gbenga Adebayo, the group said the approval was granted because despite multiparty stakeholder efforts to resolve the situation and prevent any impact on services, the banks have continued to incur greater debt, without making the commensurate payments.

Every time some progress is made, the Deposit Money Banks (DMBs) come up with reasons to take stakeholders several steps back, in this matter, the telcos had said. 

The Mobile Network Operators(MNOs) and DMBs have had protracted disagreements concerning the appropriate USSD pricing model for financial transactions, transparency of charges, mode of collection and liability for payment of the outstanding and continuous service fees due to the MNOs. 

Due to the inability of MNOs and DMBs to reach an agreement on the issues, MNOs in 2021 sought to disconnect DMBs as a result of unpaid debts which stood at N42 billion as at that time.

 However, the then Minister of Communications and Digital Economy Prof Isa Ali Pantami intervened and asked the MNOs not to disconnect DMBs as the action will negatively impact on the Digital and Financial Inclusion policy of the Federal Government. 

The Nigerian Communications Commission (NCC), Association of Licensed Telecoms Operators of Nigeria (ALTON), Association of Telecommunications Companies of Nigeria (ATCON) and Deposit Money Banks (DMB) represented by the Chairman, Body of Bank CEOs subsequently met on 15 March 2021 to discuss indebtedness of DMBs to MNOs for USSD services. But the meeting could not resolve the issue. 

In May 2023, with debt now increased to N120bn, the telecom operators again threatened to disconnect the banks from their USSD, but the Central Bank of Nigeria(CBN) quickly intervened. 

A statement issued at the time by apex bank had said, “The CBN is very much aware of the protracted dispute between the banks and telcos and has been engaging all stakeholders to ensure an amicable resolution.”

According to the statement, the direct intervention of the CBN in March 2021 resulted in per session billing of N6.98 billion (including settling any outstanding fees) between the banks and telcos.

It added that the issue between the banks and telecom operators was due to a technical crisis, which led to the accumulation of a huge debt.

As at the last two interventions by the NCC, CBN and the then minister of communications, between 2020 and 2022, the debt profiles were between N42 billion and N80 billion. But the debt now stands at N120bn and unresolved, according to the telecom operators. 

Last week, the telcos said they have yet to get firm agreement from commercial banks on when and how they would pay the debt. This came after NCC had in September at the Telecom Executives and Regulators Forum (TERF) said the deposit money banks agreed to pay the debt after the intervention of CBN. 

The Executive Vice Chairman (EVC) of the NCC, Prof Umar Garba Danbatta said the issue between the banks and telcos was resolved at a recent meeting between the CBN and the NCC, telecom operators, and the banks.

But the President of ALTON, Engr Adebayo said that while there was some admission by the banks that certain amount of debt is being owed, they were yet to agree with the telcos on how to flesh out the details and modality for payment.

“Discussions are ongoing, it has not been resolved. But there is some admittance by the banks that they owe telcos. It is now the mechanism for payment that has not been reached,” Adebayo said. However, Adebayo said there was progress given that the banks have agreed they owe the banks.

Other telecom stakeholders also confirmed they were yet to get a definitive statement from the banks on how the money will be paid.

Danbatta has said that the delay in paying the debt could impact the financial inclusion drive of the CBN.

According to him, the USSD service is being provided to the banks, who in turn provide the service to their customers. 

“They wanted end-user billing, but we said the service is being provided to the banks, not to their customers. The banks charge their customers for the service, and they are to pay the telcos in the form of corporate billing, which is neat.

“Then along the way, there was a misunderstanding and the debt kept piling until it reached a humongous amount of over N100 billion. Even at that, the service was still being provided to customers by the banks using the telecom infrastructure and the telcos were being paid nothing. This was despite the intervention of the immediate past Minister,” Danbatta said.

A telecom right activist, Deolu Ogunbanjo, said Nigerian telecoms subscribers should sue the banks if they couldn’t use the USSD for their banking transactions. 

Ogunbanjo, who is the president of the Association of Telecom Subscribers of Nigeria (NATCOMS), said the telcos wouldn’t be doing anything wrong if they eventually disconnect the banks as a result of the unresolved debt issue. 

But analysts said with the mounting debt, there is a looming threat that bank customers may be unable to make financial transactions if an agreement isn’t reached soon. 

The telecom operators have again threatened to disconnect bank customers from accessing the USSD because of the N120 billion debt owed by the banks. This move would significantly impact online banking transactions that heavily rely on the USSD platform provided by the telecom operators, financial analysts have said.