* Nigerian central bank governor Sanusi suspended by president
* Sanusi's oil graft allegations had upset political power networks
* Campaigners say resources wealth corrupts, holds back democracy
* Sanusi fate seen a cautionary tale for new producer nations
* "You can't suspend the truth," says Sanusi
By Pascal Fletcher
JOHANNESBURG, Feb 21 (Reuters) - Oil and politics make a turbid mix, and the suspension of Nigeria's central bank chief and anti-graft whistleblower Lamido Sanusi is a cautionary tale for newer African oil producers trying to avoid the "resource curse".
President Goodluck Jonathan suspended Sanusi on Thursday, citing "acts of financial recklessness", only weeks after the internationally respected bank governor had publicly upbraided state oil company Nigeria National Petroleum Corporation (NNPC) with allegations that it had failed to remit $20 billion owed to federal government coffers.
NNPC denies the allegations.
"They needed to get him out so they could keep on collecting the money as they want," Auwal Ibrahim Musa "Rafsanjani", Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), a group that seeks to promote better governance in Nigeria, told Reuters.
Jonathan acknowledges that corruption exists in Nigeria, but says it is exaggerated by his enemies to discredit him.
Rafsanjani said Sanusi's suspension was a "deliberate attempt to silence whistleblowers in the country". Presidential spokesman Reuban Abati denies it was politically motivated.
The targeting of Sanusi, 52, rattled Nigeria's markets and alarmed foreign investors who saw him as an anchor of stability in Africa's No. 1 energy producer, which has long had a reputation for corruption as murky as the oil-producing Niger Delta's viscous creeks.
Sanusi plans to challenge the legality of his suspension, although he says he does not want his job back.
Analysts and anti-corruption campaigners see domestic politics behind the move as Nigeria heads for elections in 2015 in which Jonathan, battered by graft scandals and a raging Islamist insurgency in the north, may stand for a second term.
Embarrassed by Sanusi's vocal denunciations of the massive leakage of government oil revenues, the president is battling to shore up political alliances and patronage networks lubricated by the natural commodity that provides 90 percent of the nation's foreign exchange and 80 percent of state income.
"Even though the elections are in 2015, the jockeying and deal-making have already started, and the oil sector is very much part of that," Alexandra Gillies, Head of Governance at the New York-based Revenue Watch Institute, told Reuters.
"What decides who wins elections in Nigeria is not the governance record of officials, it's the way you strike deals."
The "resource curse" theory holds that hydrocarbon and mining booms in poor countries, instead of blessing them with a shower of wealth for all, in fact poisons their economic and political development by undermining democracy, encouraging chronic corruption and entrenching selfish ruling elites.
"It's a cautionary tale that newer and smaller (oil) producers on the continent need to pay attention to," Gillies added, referring to Ghana in West Africa and East African nations who are developing fledgling oil and gas industries.
Gillies was surprised Jonathan acted against such a high-profile individual like Sanusi, who had turned himself into an anti-corruption figurehead and fixture at international forums.
In 2011, Sanusi, a career banker, Fulani nobleman and Islamic scholar with a penchant for colourful bow ties, was featured by Time magazine among their 100 most influential people in the world, lauded for his stated ambition to clean up "not just banking, but all Nigeria".
He participated and spoke at last month's World Economic Form in Davos, extolling the virtues of an independent central bank, an institution he now says is under threat in Nigeria.
Jonathan, who has made past public pledges to curb graft in his country, had already infuriated transparency advocates by declaring at Davos that corruption was not the biggest problem facing African countries - he rated the northern Islamist Boko Haram insurgency as his nation's most serious problem.
"Corruption is not a little thing in Nigeria; it literally kills people," said Marie-Ange Kalenga, Transparency International's regional coordinator for West Africa.
She said deep-rooted graft in Nigeria's public institutions led to less investment in sectors such as maternal health, or airline safety, which subsequently led to increased fatalities.
"Nigeria is clearly not a model for Africa," Kalenga said.
Yet while Sanusi's axing is a serious setback to Nigeria's efforts to improve governance, advances are being made elsewhere in Africa to improve financial transparency.
"Of course ... it's a blow for Nigeria, which is an economic and political powerhouse of Africa, but this should not overshadow real progress made elsewhere, in countries such as Senegal, Niger and Ghana," Kalenga said.
"I do think there is a much wider awareness of the importance of accountability. The levels of scrutiny are higher," said Gillies, citing mineral-rich Guinea as another country that was trying to improve due process in its mining sector, for example by publishing all signed contracts.
INTERNATIONAL OUTRAGE "MISSING"
Transparency advocates say in top African energy producers Angola, Nigeria and Equatorial Guinea the line separating the oil sector from politics is very fuzzy, and countries needed to develop stronger democratic institutions - like an independent central bank - to avoid corrosive corruption.
The international community could help, too, by publicly lobbying developing nations to apply due process and oversight in the handling of their natural resources, Gillies said.
"I do think outrage is missing in how Nigeria is being approached by the United States and other players," she said.
Although investors in Nigeria are used to challenging conditions and expect a bumpy ride, the removal of such a respected senior policy maker as Sanusi for apparently political reasons could hurt future investment plans.
"In the immediate aftermath of Sanusi's removal, we expect particularly foreign investors to continue reducing their Nigeria holdings, with the naira remaining under pressure," Giulia Pellegrini, JP Morgan's Vice President, Emerging Markets Research, Sub-Saharan Africa, told Reuters.
Nigeria's Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala, who has staunchly defended the government's efforts to reduce corruption and improve economic management in the oil sector, sought to soothe rattled markets and investors after Sanusi's suspension.
She said the administration's policies of maintaining economic stability and a tight fiscal stance would not change with Sanusi's departure and wished him well for the future.
Sanusi himself had no regrets about his outspoken campaign to denounce oil theft in Africa's second-biggest economy.
"You can suspend an individual. You can't suspend the truth," he told broadcaster CNBCA. (Additional reporting by Tosin Sulaiman in Johannesburg; Editing by Tim Cocks and Will Waterman)