One quarter of Liberia's land has been sold to logging companies in just two years, threatening the country with widespread devastation, according to a report.

A new spate of logging contracts in Liberia – the most heavily forested country in west Africa – means that 40% of its forests are under private ownership and risk being flattened by logging companies, says the report. Companies have used what campaigners describe as a legal loophole to buy unlimited swaths of private land with the intention of logging and clearing forests through the use of private use permits (PUPs).

"Private use permits are great news for logging companies. They are very bad news for pretty much everybody else in Liberia," said Robert Nyahn of Save My Future Foundation. "Some communities will receive less than 1% of their timber's value, while very little revenue will reach state coffers."

The report, by environmental watchdogs Global Witness, Save My Future Foundation and the Sustainable Development Institute, claimed PUPs had been given to private companies without consulting local groups and in some cases using forged documents.

"People being defrauded out of their forest rights at this speed and scale is worrying in itself. When you look at who the forests have been given to, it gets even more alarming," said Jonathan Gant, of Global Witness. "Giving your forests to companies like that is not a sustainable investment."

The contracts allow landowners to enter into agreements directly with logging companies, bypassing strict laws on sustainability and size limits. The groups behind the report also claim that land owned on behalf of communities has been given away with little or no consent, prompting suggestions that land deeds had been forged.

Liberia's president, Ellen Johnson Sirleaf, has announced she has suspended the head of the forestry development authority, Moses Wogbeh, and launched an investigation.

"President Ellen Johnson Sirleaf has commissioned an independent body to conduct a comprehensive review of the policies and procedures regarding the issuance of PUPs," said a statement from the office of the president last week.

Johnson Sirleaf – a former World Bank economist and Nobel prize laureate – has faced mounting allegations of corruption among senior officials in recent months. Last month, she suspended her son Charles Sirleaf from his position as deputy central bank governor after he failed to declare his assets to the country's anti-corruption commission. Two of Johnson Sirleaf's other sons continue to hold positions in government.

The new findings about the extent of PUPs will come as a further blow to Johnson Sirleaf's leadership, campaign groups say, and undermine the reform to Liberia's forestry sector since the end of the country's 14-year resource-fuelled civil war in 2003, which was characterised by the use of timber exports by the then Liberian president, Charles Taylor, to finance arms.

Experts estimate that $30m (£18m) has been spent by donors to ensure a legal process for granting logging concessions since the end of Liberia's war, and to help communities better manage their forest reserves.

A UN ban on Liberian logging was lifted in 2006, and the country resumed exports of timber in 2010 under new forestry regulation that drew praise from the international community.

However, land reform – one of the issues identified by Liberia's truth and reconciliation commission's final report as a cause of the war – has not yet happened, and is regarded as a threat to peace in the country.

Liberians said that the reaction to news of the PUPs by Johnson Sirleaf and the Liberian Timber Association – a local trade association that has filed complaints with both the Liberian senate and supreme court – did not go far enough.

"Recent statements by President Johnson Sirleaf are promising, but the response of the Liberian Timber Association is a major concern," said Silas Siakor, of the Sustainable Development Institute. "Too frequently, those who abuse Liberia's natural resources have not been held to account. If Liberia's forests and the people who depend upon them are not to be swallowed whole by Private Use Permits then the suspension of logging operations must stand this time and a comprehensive independent investigation must be undertaken."

Global Witness said: "Since the end of Liberia's war we have worked with the government and international partners like the United States, the EU and the World Bank to ensure the Liberian people get sustainable benefits from their forests. These Private Use Permits severely undermine these reform efforts."