LAGOS. Aug 7: The political crisis In off-rich Nigeria has plunged the nation's already battered economy Into the doldrums at a time when it badly needs debt relief and higher oil prices to revive, diplomats and economists say, reports AFP.

"Nobody Is planning to invest In Nigeria now ... you do not Invest when there Is uncertainty, when there are riots, or fear of war," said one western dlplo-

iEconomlc activity virtually halted after President Ibrahim Baban^da sparked off the political crix'ls by annualling the June 12 presidential election, which rnfflfonalre businessman Moshood At>i‘°la claimed to have won.

Manufactur>'r» have been unable to obtain foreign exchange because th' value of the naira, the local cu.'rency, has plummeted. On the L'lack market. the US dollar Is known is be changing hands for at least 35 naira, compared to 29 three months ago.

In the last few weeks, m-’ny companies have shut down, while those still operating have been forced to drastically trim their workforces because of tow

output or poor sales, the diplomat said.

Banks are meanwhile facing a cash crunch as most of their customers withdraw their funds for fear of renewed civil war. banker John Adiukwu said.

The biafran civil war from 1967 to 1970 left more than one million dead.

Foreign exchange reserves dropped to one billion dollar at the end of last year and now stand at a mere 600 million dollar, according to a recent World Bank report on Nigeria. They stood at about six billion dollar less than two years ago.

Nigeria derives 90 per cent of its foreign exchange earnings from the sale of crude off.

Rampant corruption and economic mismanagement have also led to a sharp decline In foreign investment over the past three years: From 700 million dollar in 1991, to about 600 million In 1992 and between 300 and 400 million dollar last year, according to official statistics.

Five years ago. foreign Investment In Nigeria averaged 1.2 billion dollar annually.

Investment, 80 per cent tff which is in the petroleum sec-

tor. comes mainly from the United States, followed by Britain. France and Germany.

Runaway inflation is also discouraging investment. It leapt to 54 per cent at the end of February, up from 44.6 per cent at the end of last year, according to the federal office of statistics.

Meanwhile, efforts to reschedule the country's 29 billion dollar foreign debt are at a stand stll) because of the political stalemate.

The military government faces tough economic sanctions from the United States and the European Community if it reneges on Its pledge to return power to a civilian administration on August 27.

Debt service arrears leapt from 2.2 billion dollar at the end of 1991 to 3.4 billion dollar at the end of last year, according to International Monetary Fund (IMF) estimates.

Last May. Nigeria and officials from the IMF and World Bank failed to reach agreement on Nigeria's off revenue figures, exchange rate policy and removal of the domestic fuel price subsidy.