The Rule Everybody Wanted

How should a regulator spur competition?

If you missed last week’s Notadeepdive, catch up here and here.

Around here, we talk about the idea that lending is easy. Getting customers to repay on time is usually where things get a little sticky. Since most customers are subprime borrowers who have no collateral, digital lenders must have their wits about them. At some point, a part of the industry decided that fear was a good solution to this willingness-to-pay problem.

That means when you install a digital lending app, it asks permission to scrape your contacts, photos, and call logs. And when you fall behind on repayment, you’ll learn what that permission was for. Prepare to have messages sent to your mother, boss, or some other unfortunate random contact announcing that you’re a thief and a debtor.

None of what I’ve just described is a secret. The Federal Competition and Consumer Protection Commission (FCCPC) has spent years documenting it. Between 2023 and 2024, it delisted 47 unregistered loan apps with Google’s help and placed dozens more on a watchlist, eventually convening a joint task force with NITDA, the police, the ICPC, the EFCC and the National Human Rights Commission to deal with apps that took customers’ contacts and images and used them to harass, intimidate and shame them.

By the time the FCCPC sat down to write a comprehensive rulebook, every serious person agreed it was about time.

The rule was the Digital, Electronic, Online and Non-Traditional Consumer Lending Regulations (DEON), and it took effect on 21 July 2025, with full enforcement from January 2026. The rules had the obvious right things like mandatory registration of digital lenders, clear disclosure of rates before disbursement, a ban on contact-harvesting, and a ban on shaming borrowers to force repayment. If you have read a loan-app harassment story, you’ll get the sense that DEON should have arrived years earlier.

Which makes what happened next peculiar.

Buried in a rule written for digital lenders was a decision to classify airtime lending as consumer lending.

And airtime lending is a different animal from payday loans. When you run out of airtime and still need to make a call, your network provider offers you ₦100 and you repay at your next recharge, plus a fee. There is no app harvesting your contacts, no recovery agent, no shame.

The telco takes its money back from your next top-up. Like most good technology, it works so smoothly that the customer never thinks about the machinery underneath. I wrote about that machinery last August, because it is a genuinely good business that pulled an entire telecoms subsector — Value Added Services, or VAS — back from the dead.

If VAS was on the ropes before airtime lending, they had it coming. These were the people behind the caller tunes, the horoscope SMS, the “win a car” promos. For years, their trade was the unsolicited subscription and services you never asked for but were signed up for anyway, debiting your airtime.

In 2016, the Nigerian Communications Commission (NCC) gave the networks and their VAS partners until June to stop sending unsolicited messages or face a ₦5 million fine plus ₦500,000 for every additional day, and gave subscribers an option to opt out with a Do-Not-Disturb code.

In December 2018, after a two-year audit of call records and subscription logs across every network, the NCC concluded that a huge share of VAS subscriptions had never been voluntary, and that some providers had built deliberate mechanisms to force-subscribe people and drain their airtime without consent. The regulator put the illegal charges at around ₦36 billion in just the five months to December 2018, ordered refunds, and threatened to suspend or decommission the offending platforms outright.

So when airtime lending came along and offered the VAS industry an honest, enormous line of business, the people in it did the sensible thing and kept their heads down.

The sector is not yet spotless, and one fair criticism of airtime lending is that it operates entirely outside the formal credit system, so a Nigerian who borrows and repays faithfully for years builds no credit history a bank can see, and the data on his reliability sits with the platform rather than a bureau. But a business that advances small sums and gets paid back is a long way from one that forcibly debited millions of people for horoscopes.

With DEON due to come into force in early 2026, the airtime lenders carried on as though it had nothing to do with them. The assumption was that airtime is a telecoms service, telecoms is the NCC’s house, and a consumer-protection regulator surely couldn’t redraw it. But the ground was shifting, and almost nobody in the sector was looking down.

They looked down on April 2nd, when the FCCPC directed MTN, Airtel, Globacom, and 9mobile to comply with DEON immediately. Rather than risk the penalties, the operators switched off airtime lending. A rule written to stop loan apps from terrorising defaulters and sanitise digital lending had, as its first visible act, taken emergency airtime away.

I wrote in April that a cynical person might notice Nigeria has never met a healthy pool of cash without wondering how to insert a middleman into it. I’m looking at you, ARCON.

The FCCPC’s case for pulling airtime into DEON was not, in fact, harassment; its argument was competition. The Commission says its findings showed that some operators ran “exclusionary third-party technical arrangements” in breach of the Federal Competition and Consumer Protection Act, exclusive deals that wired a single technical partner into a network’s airtime-lending pipe and shut rivals out.

DEON’s remedy followed from that diagnosis. Any operator lending airtime must use at least two service-activation providers, one of them fully Nigerian-owned, cannot strike a lending deal with a dominant intermediary without the Commission’s approval, and may not enter exclusive arrangements that foreclose competitors. The framing was free-market, and the rules, the Commission said, sought to open the market to local participants alongside foreign partners.

The trouble with this remedy is that the competition FCCPC claimed to be angling for actually arrived while the Commission was busy engineering it.

Commercial banks like GTCO launched a Quick Airtime Loan, lending ₦100 to ₦10,000 over your *737# code at 2.95% a month against the telcos’ 15%, running it on its own USSD rails and HabariPay’s payment infrastructure, with repayment pulled automatically from your account on the next inflow.

It asked no one’s permission, partnered with no telco, and sought no airtime-lending licence. It was a bank; advancing small sums and recovering them from an account it already holds is the most ordinary thing a bank does.

When a vacuum opened in April with the suspension of airtime lending, more banks jumped in; Access, Zenith, UBA, FirstBank, and FCMB all pushed their own airtime-loan codes within weeks. A market the FCCPC was trying to legislate into competition was, at the same moment, being competed for at a fifth of the price by firms its regulation never had to touch.

The banks aren’t a perfect substitute, of course, because you need a funded bank account to use them, so they don’t reach the unbanked subscriber the telco model serves at ₦0 balance. But the direction is that the thing the FCCPC said it wanted — more players, a cheaper product, the customer better off — happened from a class of competitor the rules didn’t anticipate, the moment there was a gap to fill.

A competition regulator’s job is to lower the barriers and punish the abuse — break the exclusive contract, ban the tying arrangement, open the field — and then let whoever wants to compete arrive on their own terms.

Clearing the field enables competition. Deciding that an airtime lender must use two intermediaries, that one of them must hold a particular nationality, and that the Commission must approve each arrangement in the chain, is the regulator specifying the number and identity of the players rather than the conditions of play. The first produces a GTBank at 2.95%. The second produces a queue for a licence.

You could grant the FCCPC its entire diagnosis — exclusive arrangements existed, concentration was real, foreign firms held data on millions of Nigerians that never touched a local credit bureau — and still say the cure was wrong. An enabling environment doesn’t hand-pick its beneficiaries. The surest sign that a rule is about competition rather than capture is that it tells you what conduct is forbidden and then falls silent on who gets to show up.

So, a rule almost everyone wanted went to court over the part almost no one needed. WASPAN, the association of Nigerian NCC-licensed firms that run this business, argued that consumer protection does not stretch to redesigning a telecoms market, which is the NCC’s remit.

Airtel and Glo restored airtime lending soon in late May, but MTN has not rejoined the party.

The FCCPC had a real problem, a good rule, and a public that wanted it enforced. It had, in the loan-app provisions, exactly the tools to clear the field: ban the abuse, force disclosure, open the market, and let the banks and the fintechs and the aggregators arrive on their own.

Instead, the Commission reached past all of it for a clause that specified who could stand in the airtime pipe and what passport they had to hold, lost the rule it had taken years to build, and stalled a service millions of people use to stay connected. The loan apps it was actually written to stop are, presumably, still out there, texting somebody’s mother and accusing them of being thieves.