Abuja - Nigeria on Wednesday accused South Africa of blocking a legal arms purchase and threatened retaliation against major South African companies, including telecom giant MTN, if the spat is not resolved.
A top official in the office of Nigeria's National Security Advisor (NSA) told AFP that the country had an agreement to buy $5.7 million (4.5 million euros) worth of military hardware in a deal brokered by a South African firm.
The official, who asked that his name be withheld, said Pretoria had frozen cash that had been wired to the South African firm's account.
South Africa's National Prosecuting Authority made no immediate comment, but the asset freeze has been widely reported in both Nigerian and South African media.
"The issue could affect bilateral relations between Nigeria and South Africa," the NSA official said.
He specifically mentioned MTN - a South Africa-based mobile phone and Internet provider with tens of millions of subscribers in Nigeria - as a company that could be targeted in tit-for-tat reprisals.
"You cannot be making so much money from Nigeria and then turn around and embarrass the people," the Nigerian official said.
He said Nigerian President Goodluck Jonathan had called his South African counterpart Jacob Zuma to inform him about the purchase and Abuja was therefore surprised to learn that the deal had been blocked.
Zuma's spokesman Mac Maharaj declined to comment on the reported conversation between the two leaders, but told AFP the president was not part of the committee that reviews arms deals.
The NSA official did not identify the South African broker.
The website of South Africa's City Press named the firm as the Cape Town-based Cerberus Risk Solutions but that could not be independently verified.
The development comes three weeks after South African customs officials seized $9.3 million in cash stashed in the luggage of two Nigerians and an Israeli.
South Africa's prosecution authority said there was evidence indicating those funds were intended to purchase armaments to be used in Nigeria.
The Nigerian security official declined to comment on whether the cash found in the plane last month was part of a weapons purchase, but insisted the $5.7 million deal frozen by South Africa was a legal arms transaction "through a bank".
Nigerian lawmakers last month approved a request from Jonathan for a loan of more than $1 billion to fight Boko Haram extremists.
Analysts saw the president's request as a tacit acknowledgement that the military is overmatched against the Islamists, who are thought to control more than two dozen towns and villages in the embattled northeast.
Troops have refused to deploy for offensives against the insurgents, citing a lack of proper equipment.
The NSA official said Nigeria would prefer to buy armaments directly from major Western manufacturers, but that multiple trades had been vetoed by the governments involved.
"Everywhere we go to purchase arms they block us... We approached the United States to buy helicopters but they categorically said 'no'. They said we have no pilots," the NSA official said.
He said Nigeria would not need to go through middlemen if the United States agreed to sell to it directly.
A State Department official, asked whether the US had rejected Nigerian attempts to buy weapons on the open market, told AFP that Washington reviews "all potential arms transfers for their consistency with US policy and interests."
He declined however to comment on any specific cases.
Nigeria is nominally considered a US ally and American oil giants ExxonMobil and Chevron have a significant presence in the country, but relations between Abuja and Washington are thought to have frayed in recent months.
The US offered military and logistical support in helping rescue the more than 200 schoolgirls kidnapped by Boko Haram in April, but experts said the Americans were largely rebuffed by Nigeria's top brass.
Sapa-AFP