(Corrects number of defecting governors to five, paragraph 3)
* APC becoming increasingly powerful after defections
* Political unrest worsening ahead of elections next year
* Ruling PDP says APC stirring "devilish plot"
By Camillus Eboh
ABUJA, Jan 24 (Reuters) - Nigeria's main opposition party will block the passage of this year's budget until what it described as lawlessness is ended in politically volatile Rivers state in the southern oil region, it said on Friday.
The All Progressives Congress (APC), which now holds a majority in the lower house of parliament, also said it would block the confirmation of twelve new ministers and four military chiefs President Goodluck Jonathan appointed this month. Nigeria is fighting a violent Islamist insurgency in the northeast.
Politics has become increasingly heated in Africa's top oil exporter since four opposition parties merged last February into the APC. Five state governors and dozens of lawmakers defected from the ruling People's Democratic Party (PDP) late last year.
Political wrangling is expected to continue until elections next year and could damage Africa's second largest economy, at a time when oil savings are dwindling and its currency, which has been largely stable, is under pressure.
"The APC hereby directs its members in the National Assembly to block all legislative proposals, including the 2014 Budget ... until the rule of law and constitutionalism is restored in Rivers State," an APC statement said.
PDP Spokesman Olisa Metuh responded by accusing the APC of a "devilish plot to undermine the nation's security system ... (and) cripple the nation's economy".
The APC poses the greatest challenge to Jonathan and the PDP since it swept to power in 1999, ending years of military rule.
OPEC member Nigeria is an increasingly attractive investment destination with surging demand for domestic debt and almost a 50 percent gain on its stock index last year, but political unrest risks tarnishing its image.
Most of the defecting state governors were from the mostly-Muslim north, but Governor Rotimi Amaechi from Rivers state in Jonathan's home oil-producing Niger Delta in the largely Christian south, also crossed the divide.
His bitter rivalry with Jonathan and a spat last year with the president's wife has led to several incidents of unrest in a state which produces more crude oil than any other. Security experts do not expect any immediate impact on oil production.
The APC say that one of its senators, Magnus Abe, was shot by the police at a pro-Amaechi rally this month, although the police deny any shots were fired when they broke up the crowd for safety reasons. Local newspapers have shown pictures of Abe being treated in a hospital in London.
The opposition also said Amaechi is harassed by the federally-controlled police and his supporters are being arrested. The police and PDP deny the allegations. (Writing by Joe Brock; Editing by Tom Heneghan)