The initiative is part of the Nigerian Government's reform program, backed by the International Monetary Fund and World Bank, to liberalise its oil market and end the costly subsidising of the nation's oil and gas industry.

Last year, Anglo-Dutch oil giant Shell won a tender to supply motor fuel in Nigeria thereby breaking into the select club of private companies that normally dominate the trade. Nigeria's four refineries produce only a fraction of their capacity of 18 million litres a day. Daily demand runs to about 25 million litres.

Even though the country exports a sizeable quantity of crude oil, it is nevertheless dependent on imported refined fuels. With a growing number of car owners, thanks to rapid population growth, the demand for fuel is expected to increase by 10 per cent in 2002 according to the Nigerian authorities.

However the four State-owned refineries are in a dilapidated state and are not working to full capacity. According to one government official, the refineries produce 360,000 barrels of oil per day even though they have the capacity to produce 445,000 bopd.

As a member of OPEC, the West African nation of 90 million says it will stick with production cuts agreed to by the cartel. OPEC has accused the world's sixth largest crude producer of overproduction by some 300,000 bopd above its assigned quota of 1.8 million bopd.