Battle of Debts: MTN, Airtel, Others Owe Bank N1.69 Trillion Amid Imminent Tariff Hike
- As telcos move to recover N250 billion USSD debt, it has been disclosed that technology companies in Nigeria are indebted to banks to the tune of N1.69 trillion
- Data from the Central Bank of Nigeria showed that the debt was 3.9% less than what the firms owed in 2023
- The drop in borrowing came as CBN continued to increase interest rates, which occurred six times in 2024
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
As of September 2024, tech and telecom firms in Nigeria owed banks about N1.69 trillion amid a raging USSD battle between financial institutions and telecom firms.
This development came amid telcos' request for a tariff hike for calls, data, and SMS.
Source: UGC
High CBN interest rates cause a drop in borrowing
Information from the Central Bank of Nigeria (CBN) showed that the debt is 3.9% less than what the companies owed in the same period in 2023.
The decline came because the CBN kept increasing interest rates, making it more complex and expensive for firms to borrow money.
Monthly records check showed that the debt increased marginally by N31.61 billion from August 2024.
All through last year, the borrowing patterns changed, beginning in January with a high of N2.47 trillion, almost double the amount from January 2023.
By March, the borrowing slowed to N1.67 trillion, dropping again from June relative to 2023.
According to a BusinessDay report, the debt decreased by September, indicating that companies were being cautious about borrowing due to uncertain economic conditions and high interest rates.
CBN increases interest rates six times in 2024
The main reason for the decline in borrowing was CBN's harsh monetary policies.
Yemi Cardoso-led CBN increased interest rates six times in 2024 after assuming office in September 2023.
The most significant increase occurred in February when the CBN rate increased from 18.75% to 22.7%. It rose to 24.75% in March, 26.25% in May, 26.75% in July, 27.25% in September, and 27.50% in November last year.
These 875 basis point rate increases were meant to combat inflation and stabilise the economy, making it harder for companies, especially tech firms, to borrow money.
USSD codes to become Inactive as Telcos disconnect 18 Banks
Legit.ng earlier reported telecommunication operators have given notice to disconnect banks' operation of unstructural supplementary service data (USSD) over N250 billion debt in two weeks.
USSD transactions, valued at N1.19 trillion by the Central Bank of Nigeria (CBN) from 252.06 million transactions recorded in the first half of 2024, may be threatened.
The data represents 12 billion daily USSD transactions, and the impending disconnection threatens Nigeria’s quest for financial inclusion.
Proofreading by Nkem Ikeke, journalist and copy editor at Legit.ng.
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