Switzerland is to hand back to Nigeria SFr622 million ($500 million) belonging to the former ruler, Sani Abacha, and his family.
The authorities say that most of the money, which had been frozen in Swiss accounts, was of “criminal origin”.
The return marks a milestone in the six-year search for up to an estimated $3 billion in assets allegedly embezzled and transferred abroad by the late dictator.
Lawyers acting for the Abacha family have already said that they will be lodging an appeal.
The Swiss announcement, made on Wednesday, signals the end of a long investigation into the funds that started in 1999.
“The greater part of these assets are obviously of criminal origin,” said the Federal Office of Justice (FOJ) in a statement.
“The FOJ has therefore ordered the transfer of these assets to an account at the Bank for International Settlements in favour of Nigeria”, added the office.
It said that a smaller proportion of the assets, where there is not enough evidence of criminal origins, which is worth around $7 million, would be transferred to an escrow account in Nigeria.
The Nigerian authorities will have no access to this account until a corresponding seizure order has been issued.
The office also said that, for the time being, the Abacha funds would remain in Switzerland. Its ruling will not become final until after a 30-day window for appeals.
The Geneva lawyer for the Abacha family, Bruno de Preux, has already indicated that the relatives will be appealing against the decision at the Swiss Federal Court.
He added that there was no proof that the funds were “of criminal origin”.
But the lawyer representing the Nigerian government in Geneva praised the Swiss for their cooperation and said that others, such as Britain, were dragging their feet.
“We are very, very satisfied [with Switzerland],” said Enrico Monfrini. “We welcome this decision which is both courageous and historic.”
The money is part of the $700 million frozen by the Swiss authorities in 1999 after Nigeria asked for assistance in investigating the financial network allegedly set up by Abacha.
Nigeria believes that Abacha, who died of a heart attack in 1998, siphoned off the $3 billion funds, which he invested in several countries abroad including Britain and Switzerland.
Switzerland returned a total of $200 million to Nigeria at the end of 2003 following settlements between the parties to the money and the Nigerian authorities, as well as seizure orders issued by the Geneva prosecutor’s office.
The justice office said that further information and documents had allowed it to piece together the paper trail left by the additional $500 million.
Nigerian officials - including President Olusegun Obasanjo - have said that the returned funds would be used for health, education, roads and other projects "to help rural and poor people".
The Swiss mission in Nigeria will "monitor the use of the Abacha funds in accordance with this assurance", said the Federal Office for Justice statement.
swissinfo with agencies
According to Nigeria, Abacha siphoned off $3 billion in funds.
In Switzerland, SFr870 million ($700 million) of this missing money has been found.
The Swiss will give back the money in two stages: around $200 million has already been handed over, $500 million is still to come.
The Abacha money was found in 19 Swiss banks.
The Federal Office of Justice said the greater part of the funds frozen in Switzerland since 1999 were of criminal origin.
The Abacha family has indicated that it would appeal the decision, at the Federal Court.