"This is the first time that money recovered from criminals will be returned to Nigeria (from Britain) since an agreement was signed in 2016 to recover and return the proceeds of bribery or corruption in a responsible and transparent way," Britain’s Foreign Office said in a statement in Lagos.
It said the money stolen by James Ibori, governor of southern oil-rich Delta state between 1999 and 2007, was retrieved by British law enforcement agencies.
The funds will go towards "vital infrastructure and building works," it said.
Home Office Minister Baroness Williams described the deal as "a significant moment in our fight against illicit finance wherever it is found."
Ibori was jailed in April 2012 for fraud amounting to nearly £50 million (at the time $78.6 million / 62 million euros) following a drawn-out extradition procedure and his evasion of arrest and prosecution in Nigeria.
The one-time cashier at a chain of British DIY stores used public funds to buy luxury homes, top-of-the-range cars and a private jet.
He served four years of a 13-year jail term, which anti-corruption campaigners hailed as a rare victory in the fight against international graft.
Millions of dollars stolen by former military ruler Sani Abacha have also been repatriated to Nigeria from Switzerland and other countries.
Abacha died in June 1998 after reputedly looting some five billion dollars.