LOKOJA, Nov 8 - After decades of delay and wrangling by resisting riverine communities, Nigeria has launched a multi-million-dollar dredging exercise to boost navigation and commerce on the Niger River.

Plans are to deepen the river channel and stabilise its banks along a stretch of 572 kilometers (376 miles) as to allow passage of large vessels and open up inland ports.

"The goal is to activate the navigational channels of the river which once served as a bubbling colonial trading route," project supervisor Joshua Arugege told AFP.

But activists are worried about the damage to the ecosystem of the host communities along the stretch where the dredging will take place.

Inaugurating the project in September President Umaru Yar'Adua said that when completed, it would "ensure all-year-round navigability of the River Niger."

"It will provide an attractive, cheaper and safer means of haulage of goods while engendering linkages and promoting commerce and trading activities between communities and peoples of the eight states adjoining the river," he said.

Contractors moved in last month and are working round the clock to beat a mid-2010 deadline.

At the Lokoja site in central Nigeria, a dredger is at work busy flushing water from the river to reduce the sea level and allow other equipment to move in.

Houseboats, dredging pipes and barges are just some of the equipment at the site of a mega operation to deepen the river to 2.5 metres, with a bottom width of 60 metres and top width of 100 metres.

Then government will move in to construct seven ports to serve the 152 host communities along the river, from which Nigeria derives its name.

"We need inland ports because the river users will require intermediate stations to load and off-load persons and cargoes," Captain Dauda Musa, area manager of the National Inland Waterways Authority (NIWA), the government agency overseeing the project, told AFP.

"The local riverine population also requires points of interface with voyagers for trading and transfer of goods to link more inland communities," he said.

The exercise, to be completed in eight months, is solely funded by the government to the tune of 36 billion naira (240 million dollars, 163 million euros).

An environmental impact assessment (EIA) was a key demand of environmental campaigners.

NIWA spokesman Suleman Makama said villagers had been made aware of the benefits of the project before it began.

"Dredging will reduce flooding of farmlands around the river," he said, adding that it would bring communities closer together and secure the flow of water to hydro-electric plants.

Kainji dam, Nigeria's largest hydro electricity power dam, relies on the Niger for water supply.

But silt in the river has limited capacity of the dam to generate power for the energy-starved country, which has a population of 140 million.

With a maximum capacity of 760 megawatts of electricity, Kainji currently produces under half at 350 megawatts.

Abiye Amadi, a spokesman for Dutch firm Van Oord, one of the four companies contracted to clean out the river, dispelled fears that communities along the water might be choked by the excavated silt during the dredging.

The government of former president Olusegun Obasanjo first awarded the contract to dredge the river in 2007 but work could not take off immediately due to a lack of funds and a court injunction granted to local activists, the Ijaw National Congress, which had insisted on an EIA report.

Yar'Adua's government re-awarded the contract last December.

Environmental activist Nadari Banigo wants authorities to lessen the hardship the project might cause villagers living along the banks.

But Beki Apera, president of Bayelsa Youth Federation, now appreciates gains that could accrue from the opening up of the river.

"We once opposed the dredging, but now that we have been properly briefed on its benefits I will tell my people not to kidnap any worker on site," he assured.