27th November 2019.
The Legality of USSD Charges on Access to Financial Services: MTN as a Case-Study
On the 20th of October 2019, subscribers of the telecommunication giant, MTN, awoke to messages from the telecommunications company (‘telco’) informing them of the proposed implementation of a charge of N4 per 20 seconds for Unstructured Supplementary Service Data (USSD) access to banking services. One of the messages read: “Yello, as requested by the bank, from Oct 21, we will start charging you directly for USSD access to banking services. Please contact your bank for more info.”
Unsurprisingly, the public exploded with uproar! With lingering issues of alleged illegal deduction of call credit and data balances, telcos in Nigeria are generally regarded with cautious suspicion by their subscribers. A charge on USSD access strengthened the misgiving that telcos are out to exploit the public, who are still grappling with varying bank charges for financial transactions.
In a swift response to this uproar, certain commercial banks sent messages to their customers informing them that the charges on use of USSD codes were not from them and urged the customers to disregard any message to that effect. The Association of Bank CEOs also denied instructing MTN to start charging customers. In another statement, the Governor of the Central Bank of Nigeria, Godwin Emefiele, opposed the move by MTN.
However, in a press statement, MTN claimed that the banks had refused to continue to bear the USSD access fee for financial services and specifically requested MTN to directly charge its subscribers, as other telcos were doing. It does appear that telco subscribers are caught in a love-hate relationship between their banks and telecommunication service providers.
On the 23rd of July 2019, the NCC issued a determination of USSD pricing, which took effect on the 1st of September 2019, to ensure that the charges reflect the underlying costs of service provision. The NCC determined that a USSD session is 20 seconds and will cost N 1.63k with a cap of N4.89k. By this determination, the NCC was not attempting to fix a specific price for the use of USSD, considering that each Mobile Network Operator incurs different costs for offering USSD services. The determination was not intended to be a direct reflection of the cost of any individual operator, but to provide a price cap, especially as the cost of providing the service constitutes a significant component of the service, which in turn plays an important role in the financial inclusion objectives of the country. It is noteworthy that this price determination does not apply to zero-rated USSD services, such as customer service, balance enquiry, purchase of airtime and data services.
Before the NCC’s price determination, in April 2017, the CBN, in its Guide to Charges by Banks and other Financial Institutions in Nigeria, fixed the charges for use of USSD codes for financial transactions as “cost recovery”. This means banks are only to recover from customers the amount spent in providing the service. This amount varies from bank to bank, and in the absence of any regulatory price cap, may go as high as the bank claims to have spent. The possibility of this undesirable outcome is what the NCC sought to side-step with its price determination. A combined reading of the NCC price determination and the CBN guideline indicates that telcos and banks are permitted to only recover their expenses for providing USSD services from customers, but with a price cap of N4.89k per USSD session for telcos.
Generally, two billing models have been used by banks and telcos in Nigeria to recover their expenses on USSD services: corporate billing model and end-user billing model. The end-user billing is a billing methodology where the customer is directly charged USSD access fees irrespective of the service charges that the bank may subsequently apply to their bank account. MTN had initially been using the corporate billing model, where the provider of the service that is accessed through the USSD channel (banks, in this case) pays the access fee at a wholesale price. It had thus attempted by its recent message on USSD charges, upon the refusal of banks to continue to bear the access fee, to switch to the end-user billing method, to which all other telcos had earlier migrated. This, perhaps, was the reason why it directed its subscribers, in its message, to contact their bank for further information.
While MTN has suspended implementation of its USSD Charges, the fact remains that banks, telcos and their respective regulatory bodies – the CBN and NCC – will need to have a roundtable deliberation to determine the cost each party incurs in providing USSD access to financial services and a suitable billing model for recovering such cost. It is imperative that these deliberations are made in consideration of the national financial inclusion strategy. By specific strategic policies, of which banks and telcos lie at the epicenter of implementation, Nigeria intends to achieve a financial inclusion rate of 80% by 2020. In recent years, financial inclusion in Nigeria has been significantly driven by the offering of financial services through mobile phones. A refusal to resolve the issue with USSD charges will significantly truncate the nation’s efforts towards financial inclusion.
For further information on this article and area of law, please contact
Olayanju Phillips at: S. P. A. Ajibade & Co., Lagos by Telephone
(+234 1 472 9890), fax (+234 1 4605092)
Mobile (+234.814.468.3333) or
[ 1 ] Olayanju Phillips, Associate, Corporate Finance & Capital Markets department, SPA Ajibade & Co., Lagos, Nigeria.
 Some of these charges include: N50 stamp duty charge for every transaction processed through PoS terminals, N52.50k monthly card maintenance fee, inter-bank fee of N65 after third withdrawal from other bank’s ATM within the same month, N4 for every text message, charges of 2% and 3% on cash deposits and cash withdrawals respectively on any amount above the limit of N500,000 for individual accounts, and charges of 3% and 5% on cash deposits and cash withdrawals respectively on any amount above the limit of N3,000, 000.
 Body of Bank CEOs, ‘SMS (Short Message Service) From MTN Nigeria to Bank Customers in Nigerian on Use of USSD Code’ (Press Statement, 21 October 2019). <https://nairametrics.com/wp-content/ uploads/2019/10/Banks-CEOs.pdf> (accessed 19 November 2019).
 ‘CBN opposes MTN over Mobile Banking Transaction Access’ (Punch Newspaper, 21 October 2019) https://punchng.com/cbn-opposes-mtn-over-mobile-banking-transaction-access (accessed 19 November 2019).
 ‘MTN: Banks Aware of Our USSD Access Charges’ (THISDAY Newspaper, 25 October 2019) <https://www.thisdaylive.com/index.php/2019/10/25/mtn-banks-aware-of-our-ussd-access-charges/> (accessed 19 November 2019).
 Nigerian Communications Commission, ‘Determination of USSD Pricing’ (23 July 2019) <https://www.ncc.gov.ng/documents/831-determination-on-ussd-pricing/file> (accessed 19 November 2019).
 NCC (n 6) 2
 NCC (n 6) 2.
 Central Bank of Nigeria, ‘Guide to Charges by Banks and Other Financial Institutions in Nigeria’ (21 April 2017) <https://www.cbn.gov.ng/out/2017/fprd/guide%20to%20bank%20charges%20circular%20to%20all%20banks%20other%20financial%20institutions%20and%20mobile%20payments%20operators.pdf> (accessed 19 November 2019).
 CBN (n 8) 20, 33, 43, 54.
 Central Bank of Nigeria, ‘National Financial Inclusion Strategy (Revised)’ (October 2018), 5 < https://www.cbn.gov.ng/out/2019/ccd/national%20financial%20inclusion%20strategy.pdf> (accessed 19 November 2019).