* Nigeria removes U.S. dollar peg, currency seen falling
* Only 50-60 pct of Lekoil capex now in dollar
* Lekoil plans investments to increase oilfield production
* Canadian Overseas Petroleum prefers paying in dollars
By Karolin Schaps
LONDON, June 17 (Reuters) - Nigerian oil explorer Lekoil
LEK.L has converted around half of its investment budget into
naira from U.S. dollars, benefiting from the Nigerian currency's
weakness to fund an oil field expansion despite growing militant
disruptions.
Africa's biggest economy and its currency have been hit hard
by a decline in oil prices. After a steep slide in the naira
NGN= in late 2014 and early 2015, the central bank pegged the
currency to the U.S. dollar. But on Wednesday it said it would
abandon the peg, setting the stage for more losses.
London-listed Lekoil, one of several small Nigeria-focused
oil explorers listed abroad, has decided to use the naira's
slide to its advantage by paying for some domestic services with
local currency.
"As a result of the significant devaluation of the Nigerian
Naira to the U.S. dollar in 2015, we have moved a significant
portion of our capex from U.S. dollars to naira," Lekoil Chief
Executive Olalekan Akinyanmi told Reuters.
Nigeria's central bank has told President Muhammadu Buhari
it was "reasonably confident" the naira would settle around 250
to the dollar after abandoning the peg at 197 per dollar. The
currency was trading around 165 in early November 2014.
Akinyanmi said 50-60 percent of Lekoil's annual capital
spending budget was now denominated in dollars, compared with
100 percent last year.
The company, which said its projects can make money even if
oil prices fall to $25 a barrel, plans to bring production at
its Otakikpo oil field to 10,000 barrels per day by the end of
the year.
Nigeria's oil production has fallen to a 30-year low as
militants have attacked a number of oil facilities over the past
months.
Lekoil, with a market capitalisation of around 80 million
pounds ($114 million), said the attacks were a concern but its
own operations had not been impacted and were well protected.
Other oil firms active in Nigeria, such as Canadian Overseas
Petroleum (COPL) XOP.V , prefer to continue using dollars,
believing investment in Nigeria's oil industry using foreign
money will help the domestic economy.
Nigeria's central bank is keen to attract foreign currency,
as its dollar reserves have fallen 11 percent year on year.
"The topside risk is something that's manageable because you
know below ground the oil is there," said Christopher McLean,
COPL's capital markets manager, referring to risks out of the
company's control.
COPL, which also has operations using dollars in other
countries such as a partnership with Exxon Mobil (NYSE:XOM) in Liberia, is
awaiting approval from the Nigerian government to acquire a
company holding an oil exploration block off Nigeria's coast.
($1 = 0.7012 pounds)
(Editing by Mark Potter)