When Olusegun Obasanjo was elected in Nigeria's first democratic elections in 16 years, the U.S. government, global corporations and investors watched with cautious optimism. After all, the new leader, who took office in May, faced the grueling task of reforming a nation that is both one of the largest oil producers in the world and one of the most corrupt.

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Obasanjo, who finishes his first official state visit to the U.S. this week, is busy outlining his vision for a "New Nigeria," a plan that includes foreign investment opportunities beyond the oil sector. But even while Obasanjo drums up interest in his agenda, recent attacks on foreign oil workers suggest his new Nigeria is a long way from becoming an investment hot spot.

The more quickly he deals with those issues, the more quickly he'll take advantage of a window of opportunity that his presidency is helping to create. Although it's barely represented in any Africa funds, some U.S. business leaders, eyeing evidence of a dramatic shift that is already under way, say Nigeria might have more economic potential than South Africa, the continent's heavyweight economy. They are already working with the U.S. government on projects and general commerce promotions in the continent's most populous country.

Among the developments inspiring optimism is the successful effort to recover $500 million from the family of late dictator Sani Abacha. That's helped Nigeria drop the title of "most corrupt nation in the world," given to it by Transparency International. (Cameroon is now the globe's most praetorian country; Nigeria is No. 2.) The recovered cash is to be deposited into Nigeria's foreign-exchange reserves to aid national development.

And along with privatizations in process, Nigeria has rendered its currency, the naira, convertible. One naira is worth a little more than a U.S. penny.

Organizations such as the Overseas Private Investment Corp., an independent government agency that sells investment services to U.S. companies, are helping investors tiptoe back to the troubled country. In addition, the U.S. government has launched an interagency effort to promote trade with and investment in Nigeria. Secretary of State Madeleine Albright has named Nigeria one of the four top priority countries for U.S. aid, although few political analysts believe her requested appropriation will pass through Congress.

"By helping Nigeria, we are helping ourselves to achieve a level of stability, democratization and economic well-being in Africa that is good for us," said Albright during her visit to the country last week.

Particularly in keeping oil flowing. Nigeria is the fifth-largest oil supplier to the U.S. Even during its military regimes, Nigeria has always been a key destination for U.S. oil companies, as well as oil companies from other countries. Oil is crucial to the Nigerian economy: 95% of its export revenue, or roughly $2 billion, come from oil sales.

Not surprisingly, oil has become a symbol of the inequities and civil disruptions of previous regimes, as well as foreign investors.

Over the past two decades, demonstrations in Nigeria and abroad mounted as foreign oil producers were accused of creating environmental hazards and complicity with violent government actions. "No blood for oil" was a battle cry against Royal Dutch/Shell ( RD), Chevron ( CHV) and other companies, as protestors such as Ken Saro-Wiwa, a writer and Nobel Peace Prize nominee, were hanged.

Shell and other oil producers, partly out of pressure and partly out of self-interest, have been working with human rights groups to develop community projects that foster greater stability and local cooperation.

"People do not want to produce at the barrel of a gun, so oil companies have been working with local people to reduce tension," says James Burkhard, Africa specialist at Cambridge Energy Research Associates. "Foreign investors can provide some input, but the big issues facing Nigeria have to be solved by Nigerians."

Security is, perhaps, the biggest. Just last month, a local Chevron employee was killed in a shootout between armed youths and soldiers, prompting the company to shut some of its installations.

Money and oil, however, rest for no one, and in recent weeks Chevron began reopening some of the shuttered facilities. Moreover, Chevron and other multinationals have increased their proposed 2000 budgets for joint ventures in Nigeria. They now expect to spend about $5 billion collectively, about 12% of the country's $41 billion economy.

Shell alone announced this week a $1 billion commitment to a field off the shore of the Niger Delta. "We have demonstrated our faith in the future of Nigeria," wrote Shell Managing Director Ron van den Berg. "The way the project has been put together is an excellent example of how partners can create a win-win situation which will be to the benefit of Nigeria at large."

Such cooperation will certainly help Nigeria's revenue in the short run and could boost the stocks of participating oil firms as inefficiencies are addressed. Without greater diversification, however, the Nigerian economy will be hard pressed to resist oil-sector shocks and provide opportunities for local and international investors.

These other sectors, such as telecommunications, natural gas and manufacturing, hold the greatest potential for U.S. firms and possibly U.S. investors. If Obasanjo is successful, he might just help Nigerian companies find their way onto the U.S. radar screen and into investor portfolios.

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