BISSAU, May 30 (Reuters) - Police in Guinea-Bissau arrested 98 foreigners on Wednesday in a dawn raid against a drug trafficking and money counterfeiting ring in the poor West African state, authorities said.

The detainees were arrested in possession of around $1 million in forged U.S. banknotes and an unspecified amount of cocaine, police sources said. They included Colombian, Nigerian, Puerto Rican and Sierra Leonean citizens.

Prime Minister Martinho Ndafa Kabi, who visited the suspects at Segundo Esquadra prison in the crumbling capital Bissau, said his government aimed to battle narcotics smuggling and restore the state's authority.

The arrival of rich and well-organised Latin American drug cartels in West Africa, where poor governments lack the means to combat their illicit operations, has raised concerns among Western drug enforcement agencies.

The traffickers use the region as a back-door route into Europe, where cocaine prices can be three times as high as in North America.

The U.N. special representative to the region, Ahmedou Ould-Abdallah, appealed to foreign governments last week to act decisively to prevent West African nations such as Guinea-Bissau becoming narco-states.

In recent months, authorities have seized cargoes of more than 600 kg of cocaine in Mauritania and Guinea-Bissau, and detained a large convoy of cannabis in Niger.

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