* Finance minister plays down insurgency's impact on economy
* Says programme will tackle northeast's underdevelopment
* "African Davos" still going ahead in Abuja next month
* Nigeria not at war, has "democracy in raw form" - minister
By Pascal Fletcher
ABUJA, April 28 (Reuters) - Nigeria is preparing a special development plan for its poor, violence-hit northeast and increasing spending to counter an Islamist revolt there that could dent growth in Africa's No. 1 oil producer if it worsens, the country's finance minister said.
Finance Minister Ngozi Okonjo-Iweala told Reuters that although the impact of the five-year Boko Haram insurgency had cut half a percentage point off Nigeria's GDP last year, she believed it could be contained and insisted the country was not facing a wider conflict as it heads for elections next year.
"There is no war ... there is an insurgency," Okonjo-Iweala said in an interview conducted on Sunday in her car in Abuja as she headed to the airport to fly to New York.
"We are not in a Colombia situation," she added, rejecting comparisons with the Latin American energy producer which has battled for decades with a major left-wing insurgency that often affected large swathes of its national territory.
Okonjo-Iweala said Boko Haram, who have raided schools, churches, government offices and security posts in their fight to carve out an Islamist enclave, mostly affected around 5 percent of the nation's territory, the northeast states of Borno, Yobe and Adamawa.
But she acknowledged Boko Haram had shown it could strike further south. A bombing at a bus station this month killed at least 75 people on the outskirts of the capital Abuja, which is hosting a World Economic Forum on Africa next week.
"The WEF is still going on," Okonjo-Iweala said. To host the "African Davos", which has previously been held in cities such as Cape Town and Addis Ababa, Nigeria was mounting the largest security operation it had ever staged for an international summit, deploying 6,000 soldiers and police.
President Goodluck Jonathan's government had increased spending to tackle the Boko Haram threat, including more army recruitment, the minister said, without giving specific figures.
Okonjo-Iweala said it included a programme for the northeast aimed at lifting the area out of poverty and underdevelopment.
"We recognise that this is an inclusion problem ... the fact that the human development indicators in that part of the country are among the lowest," she said. The government was working to obtain backing from donors for the programme.
INVESTORS "NOT TURNED OFF"
Boko Haram's attacks have stopped farmers from growing crops. Several thousand people were killed in the insurgency last year and at that rate it could hurt Nigeria's GDP in 2014, which is estimated to grow by nearly 7 percent.
"We think we can absorb it, but of course, if like last year, it continues, then we have to make an estimate of the impact," Okonjo-Iweala said.
She added that investors looking more closely at Nigeria since a GDP rebasing last month made it the continent's largest economy ahead of South Africa did not appear to be turned off by the security challenges.
"Nobody who is making an investment has so far said they will not make one, that we know of," she said.
A mass abduction of teenage schoolgirls from a northeastern school by suspected Boko Haram gunmen this month has outraged Nigerians and raised fears that the insurrection, coupled with persistent inter-communal violence in the Middle Belt, could strain Nigeria's unity, created in colonial times from an amalgam of ethnicities and religions.
Okonjo-Iweala said Boko Haram was receiving "cross-border" backing from supporters in Cameroon, Niger and Chad.
"We need to look at the source of this financing," she said, adding Jonathan was working to obtain regional cooperation to remove Boko Haram's support from jihadi groups in the Sahel.
"DEMOCRACY IN RAW FORM"
Okonjo-Iweala could not rule out that domestic political forces were also stoking the Boko Haram insurgency ahead of elections in February, when Jonathan, a Christian southerner, may stand for a second term. Northern critics say this would break an unwritten rule of presidents alternating from north and south to preserve Nigeria's sensitive, Muslim-Christian divide.
"We tend to notice when the electoral cycle comes in, all these things heat up," Okonjo-Iweala said.
But she said Nigeria had halted insurgencies before, such attacks against oil facilities by Niger Delta militants in the past decade, and that Boko Haram did not pose the same threat as the Biafran War that split the country from 1967-1970.
"What we are going through now is democracy in raw form, because people are fighting for power and they will use anything to get there ... and to win the election," she said.
She hoped politicians would heed the president's appeal for unity made on Thursday when he met the 36 state governors.
"Everybody has now come together and said this is ridiculous, crazy, unacceptable, for our children to go to school and be sleeping in their bed at night and for some people to come and abduct them," Okonjo-Iweala said, referring to the schoolgirls' abduction in which dozens are still missing.
"Nigeria as a nation will overcome this," she said. (Editing by Tim Cocks and Giles Elgood)