A significant dispute has emerged between banks and mobile network operators (MNOs) in Nigeria regarding the pricing mechanism for Unstructured Supplementary Service Data (USSD) shortcode service, a critical component for financial transactions. Prof Umar Danbatta, the Executive Vice Chairman of the Nigerian Communications Commission (NCC), revealed that no formal agreement on pricing has ever been established between the two parties, despite the service being widely used for financial transactions. This lack of resolution has prompted the Honourable Minister of Communications and Digital Economy, Dr Isa Pantami, to convene a crucial stakeholder meeting.

The upcoming meeting is expected to bring together key figures including the Central Bank of Nigeria (CBN) Governor, representatives from the banks, and officials from the NCC, along with the MNOs. This intervention follows a threat by telecommunication companies, operating under the Association of Licensed Telecommunications Operators of Nigeria (ALTON), to suspend USSD services due to an alleged N42 billion debt owed by banks. Prof Danbatta made these disclosures during a virtual press conference held on March 15, 2021, to commemorate World Consumer Rights Day, themed “Tackling Plastic Pollution.”

The core of the USSD dispute lies in the failure of banks and telcos to agree on a pricing methodology, even after the NCC introduced an updated billing model. This model aimed to zero-rate USSD transactions for end-users and mandated banks to pay telcos a flat fee of N1.63 from the service charge collected on each USSD transaction. However, banks have reportedly refused to remit these accumulated service costs, leading to the substantial debt of over N42 billion owed to network operators.

Prof Danbatta highlighted that banks are the primary beneficiaries of the USSD code, yet a fair sharing formula has not been agreed upon. He questioned the proportion of charges banks collect from customers for the service versus what they are willing to pay MNOs for leveraging their infrastructure. The NCC Vice Chairman expressed hope for a final resolution to the USSD dispute ahead of the scheduled meeting, emphasizing the importance of an amicable settlement to prevent telcos from suspending the service.

The potential suspension of USSD services poses a significant risk to Nigeria's financial inclusion strategy. USSD shortcodes provide an accessible alternative for approximately 40 million Nigerians, particularly those in unserved and underserved areas, to access essential financial services. Many rural dwellers with bank accounts rely on USSD for transactions like bank transfers, balance checks, and airtime top-ups, largely due to limited internet access and the inability to afford data plans for e-banking apps on feature phones or even smartphones.

Nigeria's financial inclusion rate currently stands at 50%, a modest 3% increase since 2012. The Federal Government's financial inclusion strategy targets 80% inclusion and only 20% exclusion. Data from Statista shows that the value of USSD transfers in Nigeria reached ₦390.5 million in June 2020. Should USSD services be withdrawn, mobile money services would also become inaccessible to a large number of mobile subscribers, potentially causing the financial inclusion rate to plummet to an abysmally low level, thus derailing the federal government's digital financial service strategy.