Experts urge banks to make SMS alerts optional as tariffs rise

Joy Agwunobi

As Nigerian banks begin enforcing higher charges for SMS transaction alerts, experts have urged banks to make the service optional, particularly to reduce the financial burden on low-income customers who are already struggling with the country’s deepening economic challenges.

The new tariff, which came into effect on May 1, 2025, raised the cost of each SMS alert from ₦4 to ₦6. This increase is a direct consequence of the broader hike in telecommunications tariffs, which has raised the operational cost of delivering such notifications. In official communications, several banks defended the price adjustment, citing the need to maintain “secure, timely, and reliable transaction notifications.”

However, the policy shift did  spark public backlash, particularly from customers already overwhelmed by the rising cost of living. Many view the hike as another layer of hidden banking charges, contributing to the erosion of trust in financial institutions and making everyday banking more costly.

Speaking on the development in a televised interview, Gbolahan Olojede, a development and financial economist, urged banks to make SMS alerts an optional service rather than a compulsory one. According to Olojede, such a move would offer much-needed relief to economically vulnerable groups, including low-income earners and unbanked individuals.

“Perhaps the most practical solution is to give customers the choice,” Olojede said. “If someone decides they don’t want SMS alerts, then they should not be forced to pay for them. We had effective banking systems before SMS alerts became mainstream.”

He emphasised that while SMS alerts are now a standard feature in banking, they were not always part of the system and should not be treated as indispensable, especially for people who are financially constrained.

Olojede also suggested that banks could revisit earlier practices where customers were offered the choice between paid SMS notifications and free email alerts—options that gave individuals better control over how they managed both their communication preferences and associated costs.

“The service is convenient, yes—but it should not be mandatory, especially for people new to the financial system or those for whom every naira counts,” he added.

Olojede acknowledged that the recent increase in SMS alert fees is not occurring in isolation. It is part of a chain reaction stemming from mounting pressures in the telecommunications industry. He referenced the severe financial losses suffered by telecom operators in 2023, pointing out that one of Nigeria’s largest telcos had its equity wiped out completely, forcing it into negative territory. These challenges, he argued, have justified the telecoms sector’s need to adjust pricing models.

“We cannot expect service providers to absorb rising costs indefinitely. The telcos have to survive too. So when they increase tariffs, banks follow suit,” he explained.

On the broader implications for the banking sector, Olojede downplayed the risk of major disruptions. However, he cautioned that the tariff increase could create additional hurdles for certain customer segments. “For individuals whose businesses depend on real-time payment confirmations—say, someone who releases goods upon receiving a transfer—the alert service is non-negotiable. These people have no choice but to absorb the added cost or pass it on to their customers,” he said.

While ₦2 may seem like a negligible addition, Olojede highlighted how the costs could add up for those who carry out numerous daily transactions, particularly in retail and small business sectors.

“People at the lower end of the income scale may not receive frequent transaction alerts. For them, the overall financial impact is relatively minimal. But for someone handling 10 to 20 transactions daily, the cost becomes significant over time,” he noted.

He also pointed out the revenue implications for telecom operators. “For telcos, this is a substantial gain. When you aggregate ₦2 across millions of banking transactions happening daily in Nigeria, the numbers become significant. It may feel small to the individual, but it’s a lifeline for these service providers,” he said.

In concluding his remarks, Olojede reaffirmed that offering customers flexibility—such as the ability to opt out of SMS alerts or switch to free alternatives like email—could strike a balance between economic realities and the country’s broader goals for financial inclusion.

“This approach empowers customers. It gives them the agency to manage their accounts without being subjected to costs they neither need nor want,” he said.

Olojede also cautioned against hasty government interventions in the private financial sector. He emphasised that the state should only step in when a company’s failure poses a systemic risk to the broader economy.

“The government must tread carefully in financial matters. Direct intervention should only occur if the failure of a business threatens to destabilise the entire financial system,” he warned.

Instead, he advocated for the government to focus on systemic reforms and policy frameworks that support private-sector resilience. “What the government should do is engage industry groups—whether the Bankers’ Committee, telecom operators, or manufacturers’ association and work to understand their pain points. The goal should be to create policies that support sector-wide stability and growth,” he advised.

Looking at the macroeconomic landscape, Olojede observed signs of corporate recovery across Nigeria in 2025, following a turbulent two-year period marked by sharp losses and volatility. According to him, many companies that recorded deep losses in 2023 began to turn the corner in 2024, with several returning to profitability—a trend that appears to be continuing into the first quarter of 2025.

“There is  evidence of a rebound,” he said. “What we are  seeing in Q1 2025 is not just profit recovery but sustained growth across several key sectors.”

But he warned that these early signs of recovery remain fragile and could be undone if macroeconomic stability is not preserved—particularly around the exchange rate.

“One of the key enablers of this recovery has been the relative stability of the naira since mid-2024. If we revert to the high exchange rate volatility we saw before then, these gains could be wiped out.”

Olojede urged the government to prioritise policies that reinforce currency stability and maintain investor confidence. He also raised concerns about declining oil prices, stressing that Nigeria’s heavy dependence on oil revenues for foreign exchange remains a vulnerability.

“If oil prices continue to fall, it will reduce Nigeria’s foreign exchange earnings, putting pressure on the naira once again. That pressure could trigger another round of currency volatility, undermining the fragile gains we’re starting to see.”

He added that sustained business recovery would have a ripple effect across the economy—from increased tax revenue for the government to dividends for investors and job creation.  Stating “When companies make losses, everyone loses. But when they thrive, the benefits cascade down. The government must nurture this momentum.”