By SPENCER SWARTZ in London and WILL CONNORS in Lagos

Nigeria has decisively reclaimed the mantle of Africa’s top oil producer, with rising output and crude prices spurring growth in the continent’s most populous country. But the same industry driving the economy—oil—faces a host of challenges.

In the next month, Nigeria’s national assembly is expected to approve energy legislation that U.S. and European oil executives warn could curtail investment. The presidential election early next year may reignite fresh violence in the Niger Delta, the West African country’s main oil region, where Royal Dutch Shell says its pipeline was attacked recently.

The sabotage reflects longstanding discontent among the poor in the area. Some attacks are conducted by oil thieves who set up illegal refineries.

Nigeria—which holds the world’s ninth-biggest proven oil reserves— produced almost 2.2 million barrels a day in July, its highest average since November 2007, according to analysts and traders.

The upswing stems largely from a lull in militant violence against Niger Delta oil pipelines and is linked to a government amnesty deal for militants who had been on a bombing spree against oil-industry infrastructure.

Thanks to the relative peace, idle oil fields are pumping again, allowing Nigeria this year to consistently produce more crude than Angola, Africa’s second-biggest producer.

Output has also increased amid the rise in fuel prices this year. Benchmark U.S. crude prices are expected to average $78 a barrel in 2010, up from $62 last year. That could push Nigeria’s economy to expand by about 7% this year, some analysts say, putting it among the fastest growing in Africa. But the rising crude output masks weaknesses in the industry.

An ominous sign for Nigeria’s production is slumping international investment. Foreign direct investment, mostly in the petroleum sector, sank to $5.85 billion last year from $13.96 billion in 2006, according to a recent United Nations report.

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LAGOS, Nigeria—Two top Nigerian stock-exchange officials were removed and a fugitive former bank executive surrendered, as efforts to clean up the financial sector accelerate.

These developments, together with an expected cabinet reshuffle by President Goodluck Jonathan, come just months before January presidential elections. Mr. Jonathan’s effort to project a cleaner government is considered a centerpiece of his election platform—though he has yet to officially declare his candidacy—and a former head of the country’s financial crimes watchdog is expected to run against him.

On Thursday, Nigeria’s Securities Exchange Commission named Emmanuel Ikazoboh, a former chief executive of accounting firm Deloitte in West and Central Africa, as interim stock-exchange head.

The appointment comes a day after a shakeout at Nigeria’s Stock Exchange, Africa’s second largest. Stock Exchange Director-General Ndi Okereke-Onyiuke was fired and the exchange’s president, Aliko Dangote, was suspended. Mr. Dangote, head of a business conglomerate, is one of Nigeria’s richest men.

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JOHANNESBURG—Ghana has gold, chocolate and a stable democracy. Now it also has a soccer team, backed by much of the African continent, playing in the quarterfinals of the World Cup.

Regional neighbor Nigeria has oil—and another scandal.

After Nigeria returned home with two losses and a tie in the World Cup, President Goodluck Jonathan suspended the team from international competition for two years. Presidential spokesman Ima Niboro on Wednesday also said the Nigeria Football Federation, which oversees the national team, was being investigated for corruption and misuse of funds.

The contrasting World Cup fortunes of the two soccer-loving nations, separated by the two wisp-thin countries Togo and Benin and sharing a common language, English, say a lot about the realities in each place.

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LAGOS, Nigeria—The restaurant manager, a tall, skinny Chinese woman named Queen Sun, hurried between tables while admonishing a group of slow-moving waiters.

We had just settled in at Ojez, a Chinese restaurant and bar well known for its live music, springrolls and stars from Nollywood.

Nollywood? Nollywood is the second-largest film industry in the world and only trails India’s Bollywood in terms of numbers of movies produced each year. And Ojez is one of their favorite meeting spots, where actors and directors mingle with producers to pitch themselves or their ideas. Deals are agreed upon informally, as with many things in Lagos, the high-energy entrepreneurial heart of Africa.

In 2006, Nollywood shot nearly 900 movies, almost all straight-to-video. The figure was nearly double Hollywood’s total for the same year. Currently, around 40 movies are shot every month in Lagos, not counting the dozens of television dramas that are also filmed here. The industry, which generates an estimated $250 million a year, is popular throughout Africa and immigrant enclaves in Europe and the U.S.

Upstairs at Ojez, musicians and a few aspiring Nollywood stars were hanging out. Jazz was playing on the speaker system in the main room. The walls were dark red and the lighting yellow. Patrons drank beer and ate fried rice.

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Nigeria has a storied legacy of fierce anti-government musicians, most famous among them the Afrobeat king Fela Kuti (currently enjoying a posthumous popular revival with the hit Broadway show “Fela!”). But since Fela’s death in 1997, there hasn’t been an obvious heir apparent to his musical prowess and political agitations, even among Fela’s two musician sons.

In the magnetic singer Nneka (Nneka Egbuna, 29), the opening act for Nas and Damian Marley’s Distant Relatives summer tour, Nigeria has found another performer capable of drawing global attention.

Nneka pulled herself up from a hardscrabble background in the oil-producing Niger Delta region of southern Nigeria and with no family support emigrated to Germany when she was 19 (her father is Nigerian and her mother is German). After years spent struggling to earn a living - including a stint cleaning bathrooms - Nneka found music.

While she has been recording for years in Germany, her first U.S. album, “Concrete Jungle,” was released just last year. Give it a listen and just try not to have it’s hard-driving first single, “Heartbeat,” get stuck in your head. Nneka also has a track called “Viva Africa,” on “Listen Up!” the official 2010 FIFA World Cup album.

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By WILL CONNORS and SARAH CHILDRESS

Foreign consumer-goods companies including Coca-Cola Co., Nestlé SA and Unilever PLC have been in Africa for decades without much competition from local players. Now, home-grown companies are expanding aggressively across the continent, eager to accommodate a growing middle-class among the billion-person population.

Among the most prominent of these consumer upstarts: African retailers such as Nakumatt Holdings Ltd. of Kenya, the top supermarket chain in East Africa, MTN Group Ltd., Africa’s largest cellphone provider, and South African restaurant chain Spur Corp. Nakumatt has expanded into three neighboring countries while 348-restaurant chain Spur has opened in seven other African countries.

Nakumatt chose to emulate an American icon: Kmart. On a visit to Florida in the 1980s, founder Atul Shah, a former mattress salesman, wandered into a Kmart and marveled at its cleanliness. He was so impressed at how the store sold food, household goods and furniture under one roof that he hung out there for hours a day for eight months. He became such a fixture that customers asked him for assistance. “Everybody was happy to be assisted by me,” said Mr. Shah.

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this story appeared on Page B1 of the Wall Street Journal

LAGOS, Nigeria—Despite some of the lowest Internet penetration rates in the world, Africa has enticed Google Inc.

Lured by the continent’s growth potential, Google aims to convince entrepreneurs, students and aid workers to make use of its search, mapping and mobile-phone technologies. But Africa—with roughly one billion inhabitants, over 50 countries and many regions that have limited access to electricity—presents huge obstacles.

“The Internet is not an integral part of everyday life for people in Africa,” said Joe Mucheru of Google’s Kenya office.

Africa lags far behind other big emerging markets in Internet use. Africa has 4% of global Internet users; China has 21%.

The continent also has some of the world’s highest costs for mobile-phone and Internet service. In Nigeria, bandwidth for Internet carriers costs $3,000 to $6,000 a month per megabyte, according to Nyimbi Odero of Google’s Nigeria office.

By comparison, the cost in the U.K. is about $20 a month per megabyte.

Despite the expense of Internet service, Google executives say Africa represents one of the fastest growth rates for Internet use in the world. Nigeria already has about 24 million users and South Africa and Kenya aren’t far behind, according to the World Bank and research sites like Internet World Stats.

“The goal is to get more people online,” said Estelle Akofio-Sowah, the Google country head in Ghana.

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By SPENCER SWARTZ And WILL CONNORS

Nigeria and China signed a tentative deal to build three oil refineries in the West African state at a cost of $23 billion, strengthening the countries’ energy partnership.

Nigeria, Africa’s most populous country and one of its top oil producers, has been eager to boost gasoline supply and overhaul its rickety refineries. And by helping Nigeria build new refineries, China may be able to expand access to the country’s high-quality oil reserves.

“This is a deal we need for Nigeria to cut our reliance on imports,” said a senior Nigerian oil official. He added that the refinery deal puts China “in the running” for getting additional access to oil acreage. “This is business, but it builds goodwill.”

Under terms, Nigeria’s state oil company, along with a host of Chinese government-run entities, would build three refineries and a petrochemical complex, according to a statement from the state oil company, Nigerian National Petroleum Corp.

Officials said critical details remain unsettled, such as the pact’s financial terms and who would operate the plants.

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By BENOIT FAUCON, MARGARET COKER and WILL CONNORS

Dubai police have arrested a former Nigerian governor fleeing corruption charges, officials said Thursday, as authorities prepare to take the rare step of extraditing him to the U.K.

James Ibori, the former governor of oil-rich Delta State in southern Nigeria, was arrested in Dubai shortly after arriving there earlier this week, according to Dubai and London police as well as Nigerian antigraft officials.

Interpol—an international police organization—sent out an alert for Mr. Ibori’s arrest before he was picked up. An Interpol spokeswoman referred calls to the Dubai police.

“He was trying to pass through Dubai, but we stopped him,” a Dubai police official said. Dubai police officials confiscated Mr. Ibori’s passport and jailed him, the official said. Judicial authorities in Dubai are currently completing paperwork informing Interpol and the U.K. authorities about the arrest. “We are ready to extradite him,” the official said.

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LAGOS, Nigeria —The death of long-ailing Nigerian president Umaru Yar’Adua appears to end a prolonged period of political uncertainty that threatened to destabilize Africa’s most populous nation, as a successor was sworn in peacefully on Thursday — months after assuming the president’s duties and sidelining his loyalists.

Yet Mr. Yar’Adua’s death late Wednesday will sharpen focus on what analysts say is sure to be an intense period of political jockeying. Nigeria is set to hold presidential elections next year and it remains unclear who the top candidates will be.

The president’s death has further complicated things by upsetting an informal agreement in the ruling political party that the presidency should shift between the north and south of the country every eight years. Mr. Yar’Adua, a northerner, was serving his first four-year term. Goodluck Jonathan, who was sworn in as president Thursday 12 hours after his predecessor’s death, is a southerner and so wasn’t supposed to hold that highest office at this time.

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