Government lawyers wanted to change the lawsuit in June to explain that the Nigerian government had been waiting for an outcome in a similar court case in the US, which explained the 11-year delay in going forward with the lawsuit.
However, a court had rejected this request.
"We came to discontinue the statement of claim because our amendment was refused ... We are filing a new suit, possibly by the end of the day," said lawyer Babatunde Irukera.
The government had stated in the amended lawsuit that "on account of the defendants' [Pfizer] fraudulent use of the unapproved drug Trovan and the deliberate and purposeful low-dosing of ceftriaxone, 11 children ... died".
"Others suffered varying degrees of injuries and/or disorders including deafness, muteness, paralysis, brain damage, loss of sight, slurred speech," the suit says.
Pfizer has denied the allegations.
Authorities in Kano, Nigeria's largest state, are seeking $2.75 billion in a separate lawsuit against Pfizer.
A hearing on that case is due in October.
Pfizer has said that it conducted the tests in the full knowledge of the government and in a responsible and ethical way consistent with its commitment to patient safety.
Afe Babalola, a lawyer for Pfizer, said the new lawsuit reflected the weakness of the government's case against it.
"It's unfortunate that the rules of the court permit them to withdraw without the case being disposed," said Babalola.
"We wish it was possible to dispose the case. That would have been the end of the matter. They had a very poor case, that's why they withdrew it".