"An immediate challenge is to manage Nigeria's oil revenues and saving to preserve macroeconomic stability," said the IMF in a statement released after Monday's meetings with Nigerian Finance Ministry officials in the capital, Abuja.

The international lenders noted that Nigeria's strategy proposing "spending levels that can be absorbed by the economy while allowing room for infrastructure investment" would allow Nigeria's economy to continue growing as long as federal government spending did not exceed its budget.

The IMF's call for restrained spending poses a particular challenge for Nigerian President Umaru Yar'Adua, particularly in the oil-rich yet mostly impoverished Niger Delta.

Earlier this month in his first budget proposal as president, Yar'Adua said the Nigerian government would allot $20 billion for security in the delta, where armed gangs and militants have caused the country's oil output to drop by 20 percent to 2 million barrels per day.

Since the 1970s, Nigeria, Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. But high unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered some of the region's youth and incited them to take up arms.

"How can we be a land of rich oil wealth while many of us live in abject poverty?" asked Adunnu Udu, a delta resident who attended a recent conference on the crisis in the delta hosted by Mujahid Dokubo-Asari, a militant leader of the Niger Delta People's Volunteer Force who was recently released from prison.

Leaders of the country's largest militant group, the Movement for the Emancipation of the Niger Delta, which some contend is part of the delta's pervasive gang culture, have asked the same thing of Yar'Adua and his predecessor, President Olusegun Obasanjo.

MEND has called for a more equitable distribution of the country's oil wealth. Along with other lesser-known militant groups, MEND has launched numerous attacks on both onshore and offshore oil installations in the delta and kidnapped more than 150 people in the last year.

Though Yar'Adua's budget announcement elicited praise from both supporters and opponents in the country's deeply divided National Assembly, it prompted speculation by some that the funding would not, in fact, help improve the everyday lives of delta residents in sore need of basic amenities such as clean drinking water.

Yar'Adua's officials deny that the estimated $7 billion being earmarked for the delta next year would go toward arms for the military in its ongoing battle against militant groups and gangs.

"I think it is a little disingenuous to suggest that the huge budget for security in the Niger Delta is some way tied to importation of arms in one form or the other," Nigerian Minister of State for Petroleum Odein Ajumogobia said earlier this month. "Everything we know about Mr. President's (Yar'Adua) approach to the Niger Delta detracts from that notion."

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