Increases in official prices have in the past triggered riots in the West African country of more than 108 million, but businesses and international lenders had long called for the abolition of fuel subsidies.

There was no public announcement of a rise in the price, but filling stations sold gasoline for 25 naira ($0.29) per litre instead of the previous 11 naira pump price.

"We can sell for whatever price we like. The government has given us a free hand," a spokesman for Mobil's Nigerian oil marketing company said in Lagos.

Last week Nigeria's number two, Rear-Admiral Okhai Akhigbe, said the government would no longer fix fuel prices but gave no indication when the change would take effect.

The deregulation of the oil market is one of the clearest signals that military ruler General Abdulsalami Abubakar is as committed to liberal economicreforms as to a widely accepted democracy plan under which he intends to step down next May.

Fuel shortages have been worse than ever this year and are seen by many Nigerians as the most obvious symptom of military misrule in the oil-rich nation.

The failure of four state-run refineries has forced the government to import massive quantities of gasoline which it can ill afford given the slump in world oil prices. Imports have still failed to meet demand.

Many Nigerians already pay over the odds to buy black market fuel which in some remote parts of the country sells for as much as 100 naira per litre.

"This is the best time to increase fuel prices because in the past three months we've been buying in the black market at prices higher than the new price," said Weneso Orogun, an analyst with the African Development Consulting Group.

"Besides, the fall in international oil prices is making nonsense of the budget. The additional money would be useful to the government," he said.

But for many Nigeriansstruggling to feed families in a harsh economic environment, the increase in fuel prices will mean yet another blow and is widely expected to lead to a more general rise in prices.

Despite the fuel shortages, the price subsidy was one of the few benefits which Nigerians could expect from a state that provides almost nothing else.

"What the fuel price increase means is that ordinary Nigerians are being punished for the failures of successive regimes," said Adindu Ogamba, a student activist.

"There have been about five increases in the past decade and each time for the same reasons, but we end up with worse service afterwards. It's not likely to be different this time."