Coupled with the country's woes over falling oil values, Nigeria is struggling with the recent devaluation of its currency, the naira, against the dollar, as well as decreasing oil production over the last year blamed on militant groups and gangs in the delta.

The combination of internal and external factors has left Nigeria's petroleum sector short of cash and has placed increasing pressure on the government to step up its efforts to rein in armed groups, reads a report released this week by the Stratfor consulting group.

A cash shortage also brings with it unwanted attention to the failure of the administration of President Umaru Yar'Adua to make good on promises to spend more on social welfare in the impoverished delta, where the majority of people live on less than $1 a day.

While the delta once produced 2.5 million barrels per day, output has decreased to less than 2 million bpd, bumping Nigeria for a short while from the top spot among African oil producers, with Angola producing more during portions of 2008.

And with oil falling from its July 2008 high of $147 a barrel to its current levels around the $40 mark, there is considerably less revenue available to tackle either violence or poverty in the delta.

"The decline in revenues leaves the Nigerian government ... much less room to maneuver amid clashing demands for scarce cash resources," read the Stratfor assessment.

For the time being, Nigeria appears trapped in a no-win situation, as militant groups such as the Movement for the Emancipation of the Niger Delta continue to bear down on both domestic and foreign oil operations in the region responsible for generating 95 percent of Nigeria's revenue via oil and gas.

High unemployment in the delta, environmental degradation caused by spills during 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, forming militant groups such as MEND.

MEND in recent months has made specific threats against soldiers in the delta, during which time several have been killed by unknown gunmen or by those claiming to be members of the militant group.

This week alone, the group was blamed for kidnapping a Lebanese construction worker and a Nigerian Catholic priest in the delta. Hundreds of foreign workers have been kidnapped in recent years, with most being freed in exchange for a ransom. However, delta gangs and militants, angered by the inequitable distribution of their country's oil wealth, also have stepped up their ire for Nigerian military forces in the region, killing dozens in 2008.

"Not spending money risks triggering reprisals in the Niger Delta, with militants largely composed of gangs of unemployed youths likely to turn to violence," according to Stratfor.

Hoping to make some headway in 2009 in the battle against MEND and other groups, Yar'Adua's government last month created a new ministry to tackle the problems in the Niger Delta, namely militancy and violence.

The Niger Delta Affairs Ministry is responsible for promoting development in the impoverished delta and combating the violence that has caused Nigeria's oil production to drop by at least 20 percent in recent years.

So far, the new ministry has been tasked with handling the substantial funding for delta development, totaling about $350 million, though the budget has yet to be approved by Nigeria's Senate. And with oil prices remaining relatively low, along with production levels, the government likely will have to re-evaluate whether it can afford such a hefty price tag for attempting to stabilize the region.

"The conduct of our leaders determines, to a large extent, how Nigerians relate to themselves. The development of Nigeria is impossible without cohesion that results from resolution of conflicts," read a recent editorial in the leading Nigerian newspaper Vanguard.

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