Corporate Risk & Class Actions in Nigeria: Compliance, ADR, and Procedural Pitfalls Every Company Should Know

Banks owe customers a strict duty of confidentiality, meaning they must protect your account information and your ability to operate it.

But this duty is not absolute. Banks may lawfully restrict an account if required by law, even if it temporarily inconveniences the customer.

This tension of  duty of care vs. legal compliance is at the heart of most disputes around frozen accounts.

It has exposed many banks to legal disputes with their customers, because imagine waking up one morning to see “POST NO DEBIT (PND)” on your Corporate Account, and you are asking : can a bank really do this? And if so, under what authority?

When Can Accounts Be Frozen, By Whom & Under What Procedure?

In Nigeria, Banks do not have the absolute power to freeze an account on their own. 

They have no power or vires under any guise to unilaterally or inherently restrict, restrain, freeze or place a Post-No-Debit  (PND) Alert on a customer’s account except by order of court first sought, obtained.

The Court of Appeal made this clear in Fidelity Bank v Bayuja Ventures Ltd, calling unilateral freezes illegal, unconstitutional, and “lawlessness".

But the law recognizes specific situations where an account can be frozen.

(A) Legal powers to freeze and account

Section 34(1) of the Economic and Financial Crimes Commission Act (EFCC Act) 2004 allows the EFCC to apply to court ex parte (without notifying the account holder) to  freeze an account suspected of holding proceeds of crime.

But the Money Laundering (Prohibition) Act 2012 gives EFCC a temporary power:

EFCC may place a Stop Order for not more than 72 hours without a court order if a transaction looks criminal. 

After 72 hours, the freeze becomes unlawful unless validated by a court order.

This is why accounts frozen for weeks or months without court orders are challengeable.

(B) Other situations where accounts can be frozen

An account may be frozen if:

• There is a criminal investigation (fraud, cybercrime, terrorism financing).

• Regulators suspect illegal financial activity (e.g., unlicensed fintech operations, crypto/forex violations breach of Central Bank of Nigeria rules).

• The Federal Inland Revenue Service (FIRS) is pursuing a serious tax default.

• A court issues a Mareva injunction or asset preservation order.

• Compliance issues arise under Know Your Customer (KYC) / Anti-Money Laundering (AML) rules (e.g., no Bank Verification Number (BVN), suspicious transactions, mismatched identity).
  
  

Who can Freeze a Nigerian Bank Account?

Only specific institutions have legal authority:

(A) Courts 

Federal or State High Courts can issue freezing, preservation, or PND orders

(B) Law Enforcement

1. Independent Corrupt Practices Commission (ICPC)

2. Economic and Financial Crimes Commission (EFCC)

3. Nigerian Police Force

4. National Drug Law Enforcement Agency (NDLEA)

All which require a court order

(C) Federal Inland Revenue Service (FIRS):  

For serious tax defaults and  tax enforcement  under the FIRS ACT

(d) Central Bank of Nigeria (CBN)

The prerogative to direct banks to block accounts used for illegal financial activities.

(e) Bank

Only for KYC or AML compliance issues; cannot freeze arbitrarily or as punishment.

Proper Procedure for freezing bank accounts 

A lawful freeze typically follows these steps:

1. Suspicion or complaint arises (fraud, tax evasion, regulatory breach).

2. The agency applies to court for a freezing order.

3. The court reviews evidence and may issue a temporary or final order.

4. Bank receives the order and places a “Post-No-Debit (PND)” on the account

5. The customer is notified

6. The customer can challenge the order and ask the court to lift it.

If any step is skipped, the freeze may be unlawful.

Judicial Trends & Cases

1. Fidelity Bank Plc v. Bayuja Ventures Ltd (Court of Appeal, 2016)

Facts:

Bayuja Ventures Ltd, a logistics company, discovered that Fidelity Bank had frozen its main operating account without any court order, blocking access to over ₦20 million. This freeze disrupted their payroll, supplier payments, and daily operations. Bayuja Ventures immediately wrote to the bank demanding access, but the bank refused, claiming it was a precautionary measure. Frustrated, the company approached the Court of Appeal.

Legal Issue:

Can a bank freeze a customer’s account without a court order?

Outcome:

The Court of Appeal ruled that Fidelity Bank acted illegally, holding that banks cannot unilaterally freeze accounts. Any departure from the duty of care owed to customers must be authorized by a competent court.

Takeaway:

Banks must always secure judicial authority before freezing accounts, or risk constitutional and civil liability.

2. Kuda Bank Case (FCT High Court, 2024)

Facts:

A small tech startup, BrightTech Ltd, noticed that ₦5 million in their operational account had been frozen by Kuda Bank following a notice from a regulatory body alleging suspicious transactions. The company’s payroll and vendor payments were delayed. BrightTech immediately requested clarification, but the bank insisted it was complying with the regulatory notice. BrightTech filed a suit claiming the freeze lacked legal basis, as no court order had been issued.

Legal Issue:

Can banks freeze accounts based solely on administrative notices without court orders?

Outcome:

The FCT High Court found that Kuda Bank acted without lawful authority, emphasizing that a regulator’s notice alone is insufficient. The court ordered the bank to restore full access immediately and awarded BrightTech ₦2 million in damages for losses caused.

Takeaway:

Banks must verify the legal validity of any freeze request before acting.

3. Paulyn O. Abhulimen v. Zenith Bank Plc & Nigeria Police Force (FCT High Court, 2024)

Facts:

Paulyn O. Abhulimen, an import-export business, discovered that ₦8.5 million in its main account was frozen after Zenith Bank received an order from a Magistrate Court in Nasarawa, following a police investigation. The company was not notified in advance, and operations were disrupted for over two weeks, affecting shipments and contracts. Abhulimen challenged the freeze, claiming both the bank and police acted outside legal bounds.

Legal Issue:

• Could a Magistrate Court issue a freezing order for a bank account?

• Was it lawful for the bank and police to freeze the account without proper notice?

Outcome:

The FCT High Court ruled that the Magistrate Court lacked jurisdiction. Zenith Bank and the Police were found to have breached their duty of care, ordered to unfreeze the account immediately, pay ₦3 million in damages, and issue a public apology.

Takeaway:

• Only courts of competent jurisdiction may issue account freezing orders.

• Banks and authorities must ensure proper notice and legality before acting.
  
  
  

4. Kuda Microfinance Bank Ltd v. Amarachi Kenneth Blessing (Court of Appeal, Ekiti Division, 2023)

Facts:

Mrs. Amarachi Kenneth Blessing received ₦5 million mistakenly credited to her Access Bank account, which she then transferred to her Kuda account. Kuda restricted her account for suspected irregular transactions without obtaining a court order. Mrs. Blessing challenged the restriction, claiming a violation of her constitutional rights.

Legal Issue:

• Can a bank restrict access to funds without a court order if it suspects irregular activity?

Outcome:

The Court of Appeal ruled in favor of Kuda, noting that the bank-customer contract and regulatory frameworks allow temporary restrictions for suspected fraud. The restriction did not violate constitutional rights, given proper contractual and regulatory alignment.

Takeaway:

• Banks can temporarily freeze accounts in cases of suspected fraud.

• Customers should understand their account agreements, which often permit such actions.

Practical Implications for Banks & Businesses 

Businesses operating in Nigeria should:

• Review banking agreements to understand PND clauses.

• Set up monitoring systems for regulatory or suspicious-activity alerts.

• Maintain backup accounts or dual banking arrangements.

• Insert contract clauses about what happens if an account becomes inaccessible.

• When a freeze occurs, contact legal counsel immediately to:
  
  

  1. verify if a court order exists

  2. challenge unlawful freezes

  3. negotiate with regulators

  4. limit business disruption
     
     

Conclusion

Freezing bank accounts in Nigeria is a highly regulated action. While banks and authorities have some powers under law, improper freezes can lead to legal liability and reputational damage. Understanding the procedures, legal authority, and case law is essential for businesses to manage risk and protect operations.