The Upcoming N42 Billion USSD Fight Between NCC And Nigerian Banks

The Upcoming N42 Billion USSD Fight Between NCC And Nigerian Banks

Now that the Nigerian Postal Service (NIPOST) has won the fight against the Federal Inland Revenue Service (FIRS) on stamp duty, we can all now move to a new one which is brewing: the USSD fight between banks and the telecom regulator, NCC (Nigerian Communications Commission). For years, NIPOST has maintained that the stamp duty revenue belongs to it while the tax agency claims otherwise.  But the ruling is clear: the Federal Government wants NIPOST to collect the stamp duty.

On the USSD fight, NCC claims that banks owe N42 billion for services which telcos have provided through USSD (Unstructured Supplementary Service Data) which has become a popular way for people to do banking in the nation. The Executive Vice Chairman of NCC, Umar Danbatta, disclosed this indebtedness during the 2021 Bullion Lecture: “It is expected that they (telcos) will recoup their investments in order to continue and to expand the service. About N42bn that is owed the telcos has not been paid by the banks for the provision of this service.”

“The issue of the USSD has become an issue between the telcos and the banks. The telecommunication companies provide the infrastructure which the banks leverage on to provide banking services of all kinds.

“Therefore it is expected that for this service someone should pay. No service is free. The investment in infrastructure that is driving the USSD service is a huge investment that the telcos made.

 “It is expected that they (telcos) will recoup their investments in order to continue and to expand the service. About N42bn that is owed the telcos has not been paid by the banks for the provision of this service.

“The telecommunications companies cannot unilaterally withdraw this service because it will be seen as a subversive act, undermining the digital inclusion strategy of the present government.

“And no government will sit back and watch while services that empower citizens are being tampered with or withdrawn. No government will standby and watch this to happen.

“So in the next couple of days, we are poised to engage the banks and ensure we reach an amicable resolution where the first item on the agenda that will feature is the payment of this N42bn accumulated debts to the telecommunications companies.”

 “They (rural residents) need phones that are affordable and therefore we must direct our resource in a manner that will bring affordable handsets to the rural population.

This is going to be a big fight since any money recouped from this will likely move to the national treasury, not just the telcos.  You may be surprised to see this as a line item in the funding of the 2022 national budget.

That noted, the loser here is the telecommunication industry. They commoditized a very important revenue line. Even in the United States, USSD services are never free: someone pays for them. Yet, no bank covers that cost here. So, at the end of the day, it is a decision for the customer to make: use the web and pay the data metering cost, use USSD and pay the fee, or take a taxi to the bank halls! That a group of smart people allowed banks to build on top of them, free, is simply unbelievable.

Just as Elon Musk is educating Ford, Toyota and other car companies on how to sell cars, using a software model, the telcos need to open a new playbook. Yes, if someone buys your Tesla, some software licenses do not transfer automatically as the new owner is expected to pay for them. Also, even as an owner, you need to be paying for subscription to receive upgrades on your car software. That business model is Tesla’s best innovation!

I see Tesla as the only current “automobile” company in the world that has a clear playbook to make, possibly, more money on software and services than actually on sales of metals packaged as cars

Who wins this fight? I vote for Nigeria, not telcos.

Comment on LinkedIn Feed

Comment: Having understood our business and environment, sometimes I don’t take Musk to seriously.

My Response: You better take Musk seriously because he is pioneering new business model. His one oasis is the car but he captures value via multiple plays like emission credits, software licenses, etc. Musk does not need to sell a lot of cars if the few has has sold can be sending him monthly income. In other words, Toyota can sell 2m one-off forever. But Musk can sell 100k and those 100k will bring revenue forever. He has a better business – and that is why markets are rewarding him.

New Comment: You haven’t explained how the telcos will lose out here? If they are not getting any revenue from the USSD service support to banks and decide to switch it off, its still the same thing…”No Revenue”, they will simply be standing at the same spot. But the banks will lose access to that channel of service delivery as well as the revenue that comes from there, which by the way is quite a lot. GTB for instance charges N20 per service use of 737 to transact, why can’t they share revenue with the operators that facilitates the platform? If the plug is pulled, who loses? GTB that is already making N20 daily times the thousands of transactions everyday or the telco who is providing the service and is not getting any revenue from it? On this one sir, the banks will lose….not the telcos…..Except the operators are forced not to pull the service as part of the regulatory support for a digital economy…..then they won’t have much bargaining power than to find a middle ground….

My Response: “You haven’t explained how the telcos will lose out here? ” – I did actually in the full piece just that space is not enough to explain here. I did note that any money NCC recovers from this may be used to fund Nigeria’s budget since telcos have not put BIG efforts on this. The banks will never lose as they are better on pricing.

This is what banks will do: if telcos begin to change, banks will ask you to sign a document before USSD banking can be activated. That paper gives them the rights to deduct their fees once you use USSD. Banks will NEVER lose provided the service is operational. Telcos will not cut it out; the best it can do is to ask people to pay. That changes nothing for banks.


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One thought on “The Upcoming N42 Billion USSD Fight Between NCC And Nigerian Banks

  1. Which agency invented the electronic stamp duty? It needs to be collecting royalties from the NIPOST! You don’t invent something lucrative, only to go home empty-handed…

    As for the NCC and USSD, I find the statement from its head quite pathetic and weak. I mean, who taught people to think like this? It’s weird.

    First, the telcos goofed on the way the USSD was made available to the banks, maybe the former didn’t know much about business and models, they were engrossed in network coverage and selling SIM cards, so they forgot a key piece: recurring revenues, their own tax!

    Telling us you can’t pull the service because of a supposed digital inclusion of the government doesn’t really make a sound argument. If the government wants digital inclusion, it needs to pay for it, else banks should pay for what they profit from; no other way to see it. Making it sound like you are going to beg the banks puts you in a weak position, that’s not a winning model.

    No victimhood in business, you either play well or you get smashed.

    We see this lack of foresight across many sectors in Nigeria, that is why some don’t know when a potential great value slipped through their fingers, only to realise, after the spoils have already been shared.


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