telecoms monopoly Nitel, citing a lack of investment and unpaid debts.
Local firm Transcorp paid $500m (£304m) for a 51% stake in Nitel in 2006.
But state officials said Transcorp had breached its contract and the
government would control the company until a new investor was found.
Nitel has been hit hard by a decline in both fixed line and mobile
phone subscriber numbers.
The government said Transcorp had failed to meet its obligations to
invest 8.9bn naira ($60.7m) within 100 days of the takeover and had
racked up debts of 17bn naira.
"The government is considering a technical board to manage Nitel until
a new core investor emerges," said Christopher Anyanwu, director
general of the Bureau of Public Enterprises.
Since 2001, Nitel has seen its number of fixed lines plunge from more
than 500,000 to about 100,000.
Subscribers to its mobile phone subsidiary Mtel have also fallen from
1.3m to a few thousand.
Former President Olusegun Obasanjo first tried to sell the firm in
2001 before Nitel bought its majority stake five years later.