By Tom Ashby

ABUJA, April 17 (Reuters) - Nigerian authorities on Tuesday cleared Vice-President Atiku Abubakar to stand in Saturday's presidential election, posing a new challenge to the country's ruling party.

The announcement shook up the race to lead Africa's most populous nation, days after the ruling People's Democratic Party (PDP) won a landslide victory in regional polls marred by violence and widely condemned as rigged.

The Supreme Court ruled on Monday that the electoral commission had acted illegally by disqualifying Abubakar, arch-rival of outgoing President Olusegun Obasanjo. But it had not been clear until Tuesday's announcement that his name would appear on the ballot.

"The commission assures every Nigerian that the vice president will be on the ballot," said Philip Umeadi, spokesman for the Independent National Electoral Commission (INEC).

Umeadi gave no details of how the commission would change 60 million ballots four days before the poll, which should usher in the first transition from one elected leader to another since independence from Britain in 1960.

Abubakar's Action Congress party won just one of 36 state governorships in last Saturday's elections, which he called "worse than a robbery".

A coalition of local election observers said the results announced in 10 of 36 states did not reflect the will of the people and should be rejected.

Former army ruler Muhammadu Buhari of the All Nigeria People's Party (ANPP) is the other main challenger to Umaru Yar'Adua, Obasanjo's chosen candidate for the PDP.

The ANPP accused INEC of changing results in seven states and announcing a winner in another six where no election took place because the ballots were stolen.

The United States urged Nigeria to address problems in the state elections to ensure a free and fair presidential vote.

The Supreme Court ruling also raised questions about six governorship elections where opposition candidates were disqualified by INEC.

Abubakar's AC party said those results should be cancelled.

INEC disqualified Abubakar, locked in a bitter public power struggle with Obasanjo for more than two years, because of an indictment for fraud last year by a hastily-convened government panel packed with Obasanjo loyalists.

The indictment emerged from a mud-slinging match between the two men, who accused each other of looting public funds.

Nigeria returned to democracy in 1999 with Obasanjo's election, ending three decades of almost continuous army rule. He must stand down after serving two terms.

Abubakar, a former customs officer who helped found the PDP and retains the loyalty of several influential members, has hailed the Supreme Court's decision as a victory for democracy. But it is unclear how serious a challenge he can mount.

He attended a meeting with Buhari on Tuesday to discuss a united opposition front around a single candidate.

No details from the meeting were immediately available but analysts say chances of a deal are slim.

(Additional reporting by Camillus Eboh in Abuja)

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