ABUJA - Nigeria has signed a $1.2 billion contract with Chinese state-owned engineering firm CNCEC to revamp a gas processing plant crucial for the country's aluminium production, its Petroleum Ministry said.

The contract signed between CNCEC and BFI Group - the core investor in the Aluminum Smelter Company of Nigeria - is the first step towards reviving the dormant smelter, which has been plagued by years of inactivity due to legal disputes and financial issues.

The Petroleum Ministry said late on Monday that the deal would see CNCEC resuscitate the 135 million standard cubic feet per day gas processing plant at the dormant smelter, which can produce around 300,000 tons of aluminium annually.

Minister of State for Gas Epkerikpe Ekpo said the plant's restart would allow Nigeria to develop multiple stages of the aluminium production process and position it "as a major producer of aluminium in Africa and globally".

The plant is expected to produce around one million tons of aluminium annually and generate up to 540 megawatts of electricity, Ekpo said.

(Reporting by Camillus Eboh; Writing by Elisha Bala-Gbogbo; Editing by Jan Harvey)