Osun State Rocked: Courts Freeze Government Accounts Over Staggering $13.9M Debt!

The Federal High Court in Lagos has mandated commercial banks to implement a “Post No Debit” restriction on accounts managed by the Osun State Government. This significant interim order, granted by Justice D.E. Osiagor, follows an application filed by Gamji Nigeria Company Limited, through its counsel Yunus AbdulSalam, SAN, in a suit identified as FHC/L/CS/1233/2026. The company is seeking to safeguard a substantial arbitration award totaling $13,924,343.32 and N157.5 million.

The arbitration award arose from disputes concerning water infrastructure projects executed in the Ilesa West Local Government Area of Osun State. The financial institutions affected by this directive include prominent names such as Guaranty Trust Bank, Access Bank, First Bank, Zenith Bank, United Bank for Africa, Ecobank, Fidelity Bank, Stanbic IBTC, Sterling Bank, Union Bank, and Wema Bank, among others.

According to an affidavit supporting Gamji's application, the contentious matter originated from two contracts awarded to the company by the Osun State Government in June 2017. These contracts were for critical water infrastructure works under a broader water supply and sanitation project in Ilesa West. Specifically, Slot 1 encompassed the construction of transmission mains and booster pump stations, while Slot 2 involved the building of water reservoirs. Gamji affirmed that these projects were financed through an Islamic Development Bank loan facility, facilitated by the Federal Ministry of Finance.

Initially, the Slot 1 contract was valued at $15.98 million and Slot 2 at $9.70 million. However, subsequent engineering design changes and variations in the scope of work led to unavoidable delays and revisions in project costs. Consequently, the value of Slot 1 increased to $20.24 million, and Slot 2 rose to $10.95 million. Gamji asserted that it had completed approximately 93 percent of the contracted works by October 2023, with the state government issuing a Substantial Completion Certificate on November 14, 2024.

Despite the advanced stage of completion, disagreements surfaced regarding claims for extensions of time, price adjustments, and increased costs of materials and labour. Gamji stated that the state government rejected these claims, and attempts to resolve the disagreement through mediation proved unsuccessful. Consequently, Gamji issued an arbitration notice on April 3, 2025, a process which the state government accepted, even nominating its own arbitrator. Preliminary proceedings for the arbitration were held in Lagos on May 15, 2025.

The arbitral panel delivered its final award on July 24, 2026, unequivocally directing the Osun State Government to remit $13,924,343.32 and N157.5 million to Gamji, which included reimbursable arbitration fees. Furthermore, the panel stipulated an annual interest rate of 20 percent on any outstanding amount should the payment not be made within the stipulated compliance period. Gamji claimed that the compliance deadline expired on August 24, 2026, without the state government fulfilling its payment obligations, which ultimately compelled the company to seek redress from the Federal High Court.

In granting the interim application, Justice Osiagor issued a direct order to the listed financial institutions to immediately impose a “Post No Debit” restriction on the Osun State Government accounts domiciled with them. The judge specifically ordered the preservation of funds up to the exact arbitral award amounts of $13,924,343.32 and N157,500,000.00. This measure is intended to ensure the liquidation of the arbitral award, which has now become due and enforceable, pending the hearing and determination of the motion on notice. The court has adjourned the matter until October 22, 2026, for the hearing of the substantive motion on notice, reiterating that this is an interim order and does not represent a final determination of the substantive application.