The Nigerian leader, General Abdulsalami Abubakar, said that government revenue - heavily reliant on oil earnings - was likely to fall by about half.

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"The global decline in the international crude oil prices, the reduction in our Opec quota and the temporary closure of oil wells in the Niger-Delta led to a sharp reduction in government foreign exchange earnings from crude oil", Gen Abubakar said.

The country's budget for 1998 was drawn up on the premise that a barrel of oil, of which about two million are produced every day, would sell for US$17. The budget for 1999 is calculated on an oil price of barely US$9.

General Abubakar: "Sharp reduction in earnings"

The general said it was necessary to make some hard and painful decisions, arguing that these were necessary so that the incoming civilian administration - due to take power in May - should not be encumbered with unsustainable policies.

He said the country would have to cut back on its debt repayments and could no longer afford to repay the minimum wage for civil servants, a reform introduced in September.

But in a move that will impress Western donors and international institutions, General Abubakar has announced the immediate abolition of the dual exchange rate.

Under this system, certain privileged groups were allowed access to foreign exchange at a rate about four times cheaper than the general public.

As he admitted, this will remove a long-standing opportunity for personal gain at the expense of the public purse.