Asari wants the Ijaws to benefit more from Nigeria's oil wealth
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President Olusegun Obasanjo of Nigeria has expressed confidence that recent violence in the oil-rich Niger Delta can be contained and peace return.
In an Independence Day address to the nation, Mr Obasanjo confirmed talks with "rascally elements" that had threatened foreign oil workers.
Militia leader Mujahid Dokubo Asari had threatened "all out war" from Friday, but on Wednesday announced a truce.
However, he warned that the agreed ceasefire was not being respected.
Police say there have been no clashes in the Delta.
"The situation in River State is calm. There is no firing from any sides. There is no firing at all," Silvester Araba, the police commissioner for Port Harcourt, the region's capital, told the BBC's Focus on Africa programme.
Talks involving the government and Mr Asari are continuing in Abuja on Friday.
Nigeria is the world's seventh largest exporter of oil, but 70% of the population live in poverty.
'Red alert'
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In pictures: Fighting for oil
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However, he said routine patrols are continuing and the security forces remained on "red alert".
Mr Asari is the leader of the Niger Delta People's Volunteer Force and says he is fighting for Ijaw people's rights in the Niger Delta, but officials dismiss him as an oil thief.
On Wednesday, he said a truce had been agreed with the president, but refused to disarm until his key demands of self-determination and control of resources were discussed.
In a speech to the nation to mark Nigeria's 44th anniversary of independence, President Obasanjo said the militants felt aggrieved by the actions of the state authorities.
He called on officials to be more responsive to the "plight of the people they are elected to govern".
Oil smuggling
The group's threat against foreign workers in the southern oil region was seen as one reason why oil prices hit record highs of $50 a barrel this week.
Mr Asari went into hiding in the creeks of River State earlier this year, and hundreds of people have died in subsequent clashes with the police, navy and rival gangs.
Fighting has intensified in the last month since the military launched a major operation against the group.
Last week, Shell pulled out more than 200 of its non-essential staff from two gas and oil fields because of heightened tensions.
The BBC's Anna Borzello in Nigeria says the Niger Delta holds the bulk of Nigeria's oil reserves but the area is under-developed and riven by conflict, often caused by armed gangs involved in the lucrative trade of smuggling crude oil.