According to data from the Central Bank of Nigeria (CBN), Unstructured Supplementary Service Data (USSD) transactions remain a cornerstone for the nation’s financial ecosystem as more Nigerians use the channel to send and receive money.
CBN’s recent electronic payment statistics reveal that between January and June 2024, 252.06 million USSD transactions were conducted, amounting to N2.19 trillion. This figure represents 45.3% of the total value of USSD transactions recorded in 2023 and 40% of the year’s transaction volume.
For context, USSD transactions in 2023 totaled N4.84 trillion across 630.6 million transactions. Also, in 2022, Nigerians processed 515 million USSD transactions. It serves both the financially underserved and served. Initially designed for telecom services like airtime purchases, USSD has become an indispensable tool in Nigeria’s banking sector. Its offline capabilities make it particularly valuable in advancing financial inclusion by enabling quick, convenient transactions in areas with limited internet connectivity.
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However, despite its growing adoption, the USSD payment channel is plagued by unresolved financial challenges. Deposit money banks (DMO) and telecom operators have been at loggerheads since 2019 over the non-remittance of USSD fees. In 2023, Telcos in Nigeria, threatened to withdraw service, stating that banks refused to pay the N200bn owed.
Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), recently criticized banks for profiting from USSD services while failing to settle debts owed to telecom operators. Reports reveal that telecom operators are owed N250 billion for USSD services, a debt that has lingered for six years.
While smaller banks have begun repaying their share, tier-one banks responsible for the bulk of the debt have yet to make significant payments. Adebayo noted that recent repayments, though a step forward, are far from adequate. The unresolved USSD debt remains a significant hurdle. Resolving these financial disputes is critical to maintaining the sustainability of USSD services and fostering the growth of Nigeria’s broader electronic payment landscape.
Notably, alongside the surge in the USSD payment channel, other electronic payment methods have seen remarkable growth in Nigeria. Automated Teller Machine (ATM) transactions reached N12.21 trillion from 496.44 million transactions in the first half of 2024, demonstrating their rising popularity. Similarly, point-of-sale (POS) transactions are gaining traction, underscoring the country’s ongoing transition to a cashless economy. In July 2024, PoS transactions surged to an unprecedented N1.01 trillion, as online transactions grew by 89% YoY.
The Nigerian payment landscape has witnessed a significant transformation in recent years, driven by technological advancements and changing consumer preferences. As electronic payment channels continue to evolve, addressing challenges that affect these systems is crucial to achieving a fully inclusive financial system in Nigeria.