Protests are taking place against costlier petrol

Ending the subsidy was "the right thing to do," Dr Joseph Oladele Sanusi told BBC World Service Radio.

Propping up fuel prices "has been creating a lot of problems for the Nigerian economy," he said.

Nigeria's President Olusegun Obasanjo wants to raise fuel prices by 65% as he believes the subsidy would be better spent on improvements in health and education.

New finance minister

Riot police were ordered to spread around Lagos on Wednesday to maintain order after the Nigeria Labour Congress (NLC) called an indefinite general strike from Monday 30 June, the news agency Agence France Presse reported.

The NLC said: "Patriotic Nigerians including our revered religious and community leaders should identify with our protests and prevail on government to bring down the prices."

However, President Obasanjo may have moved a step closer to restoring Nigeria's relationship with the International Monetary Fund (IMF) despite domestic tensions.

News of the price rise led to long queues at petrol stations

His choice of Ngozi Okonjo-Iweala as finance minister on Wednesday won warm praise from international lenders.

She is currently a vice-president of the World Bank and has held senior jobs in East Asia and the Middle East during 20 years at the Bank.

The central bank governor said the appointment of a new finance minister may improve the chance of reopening talks with the IMF.

Nigeria withdrew from an IMF programme last year saying it was too burdensome.

Price rise 'needs explaining'

Dr Sanusi dismissed the fuel strike as politically motivated - "the opposition use anything"- but said the government "needs to spend more time explaining to the people".

The existing fuel subsidy means "people are paying much more. It costs them money, it costs them time because they have to queue," he said.

Smugglers make hefty profits on selling the subsidised fuel, often abroad, creating shortages which leads to a black market in which motorists have to pay up to three times the subsidised price.

However, previous attempts to raise fuel prices have led to riots.