Nigerian telecom subscribers will soon see a change in how they are charged for using Unstructured Supplementary Service Data (USSD) services, with a transition to an end-user billing system that will result in direct deductions from their airtime. This development comes as deposit money banks (DMBs) and telecommunications operators have reportedly reached advanced stages in discussions to implement this new billing model.
End-user billing represents a fundamental shift from the existing corporate billing system. Currently, banks are billed for the USSD usage incurred by their customers. Under the new system, however, the cost of using USSD will be directly borne by the subscriber. This means that a customer's mobile account, whether through airtime or direct billing, will be debited for each USSD session, irrespective of any subsequent transaction fees the bank might apply.
Gbenga Adebayo, the Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), confirmed the ongoing discussions in a statement to The Guardian. He indicated that the modalities for the new system are being carefully refined to ensure a smooth transition that accommodates the interests of subscribers, telecommunications companies (telcos), and the DMBs.
Adebayo highlighted that the move towards end-user billing, a system long advocated for by the banks, is expected to mitigate the issue of accumulated debts that has plagued the relationship between banks and telecom operators. The previous corporate billing model had led to significant disagreements and substantial outstanding payments from banks to telcos for USSD services.
Explaining the mechanics of the new system, Adebayo stated, "So, we have now commenced discussion to migrate to End-User billing without disruption to services by subscribers. Today, when you do USSD, the banks charge you and debit your account (Debit alert for the transfer). When the discussions are completed, banks will not debit again, but it will go directly from your airtime. Instead of the banks taking the money from your account, it will go from your airtime."
He emphasized that while discussions are well underway, a formal agreement still requires the involved parties to finalize details regarding system upgrades and operational transparency to prevent erroneous billing. "The conversation has started; there is a migration process that we are going to agree with the banks. This will be the end solution to the issue of USSD debts, which is what the banks have been clamouring for. The discussion is one, but parties still need to agree that systems need to be upgraded and operations need to be transparent so that people are not billed for services they did not get. The conversation is on," Adebayo reiterated.
The push for end-user billing is not a recent development. A letter addressed to ALTON by the Body of Banks’ Chief Executive Officers (BOBCEO) as far back as September 16, 2019, revealed that bank chiefs had already proposed an "orderly implementation" of this billing method for bank customers, aligning it with what they considered the "standard practice for USSD billing."
In their memo to ALTON at the time, the bank chiefs expressed their opposition to sharing revenue from USSD transactions with the telcos. They claimed that the service providers had proposed taking a cut of N4.50k per 20 seconds from the charges paid by customers to the banks. The banks strongly resisted this proposal, arguing that it would lead to a significant increase in costs, estimated at around 450 per cent at that point.
However, the end-user billing proposal did not gain traction with the telcos at the time due to various technical and operational complexities. The telcos had instead insisted on maintaining the corporate billing model, where banks were directly responsible for the USSD charges. The stalemate that ensued over the past five years significantly contributed to the accumulation of substantial USSD debts, which are now subject to a recovery mechanism. Currently, subscribers are charged N6.98K for every USSD transaction, a fee that took effect on March 16, 2021.
As of November 2024, the Nigerian Communications Commission (NCC) reported the total USSD debt to be N160 billion. Following a directive issued to telcos in January to deactivate banks that failed to meet their payment obligations, significant progress has been made in recovering these outstanding amounts. Approximately 18 banks were identified as being culpable in the debt accumulation.
Providing an update on the recovery process, ALTON Chairman Adebayo stated that "significant progress has been made to recover the debts. It is not yet uhuru! Quite a number of the banks have honoured their obligations as directed by the two regulators. Everyone is following the circular directive. There are some still not obliging the directive, but sanctions will come upon them."
The recovery efforts are being guided by a circular jointly issued by the Central Bank of Nigeria (CBN) and the NCC. This regulatory directive mandated that DMBs and Mobile Network Operators (MNOs) agree on payment plans for the outstanding debts, either as a lump sum or in installments, by January 2, 2025. For banks opting for installment payments, the directive stipulated that these must be completed by July 2, 2025.
The regulators also mandated that 60 per cent of all pre-Application Programming Interfaces (API) invoices must be paid as a full and final settlement. Furthermore, DMBs are required to pay eighty-five per cent of all outstanding invoices issued after the implementation of APIs (i.e., February 2022 onwards) by December 31, 2024, and to liquidate 85 per cent of all future invoices within one month of service.
Crucially, the regulatory directive also outlined the conditions for the transition to end-user billing. The NCC will activate the necessary regulatory processes to revert to EUB only upon satisfactory implementation of the debt settlement directives. Only MNOs and DMBs in full compliance with the debt recovery mandates will be permitted to transition to the new billing system. The NCC and the CBN have also committed to providing public enlightenment measures regarding the transition in due course.
In the interim, pending the full implementation of end-user billing, MNOs have been instructed to adopt a "10-second rule" for USSD invoicing, meaning that any USSD session lasting less than ten seconds will not be billable to the consumer. The regulators also noted that DMBs with prepaid billing options have the opportunity to migrate to EUB, subject to the completion of the required regulatory processes.
The impending shift to end-user billing for USSD services marks a significant change in how Nigerian telecom subscribers will interact with and pay for these essential services. While it aims to resolve the long-standing issue of debt between banks and telcos, it will also place the direct cost of USSD usage on the consumers' airtime, a development that subscribers will need to adapt to in the coming weeks and months. The success of this transition will depend on the clarity of communication from regulators and service providers and the transparency of the billing process to ensure fair and accurate charges for consumers.