The government will also carry out a full audit of accounts of the country's World Cup organising committee to see if money has been stolen.
"If any financial misappropriation is discovered, all officials responsible will be held accountable," Niboro said.
Nigeria suffered a poor World Cup, finishing bottom of their group after registering a draw and two losses in the three games.
"We need to reorganise the structures and there is need to withdraw from all international football competition so that we can put our house in order"
Niboro said that the game in Nigeria would be comprehensively restructured following the performance.
"The problem of Nigerian football is structural. We need to reorganise the structures and there is need to withdraw from all international football competition so that we can put our house in order," he said.
Nigeria's football federation issued an apology to "all football-loving Nigerians" for the team's performances at the World Cup, and said there would be more friendly matches in future to better prepare the team for high-calibre opposition.
Fans were not convinced by Jonathan's directive, which they said smacked of political opportunism.
"Sounds to me like the president is trying to score cheap political points ... the next major international competition is two years away anyway," said one fan in Lagos, who asked not to be named.
Fifa, world football's governing body, takes a strong stance against political interference in the sport and could slap sanctions on Nigeria following the decision.
"We have had no official information from the Nigerian FA about this case specifically but in general Fifa's policy towards political interference is well known. Our statutes do not allow for any political interference," a FIFA spokesman said.
It is the second time a Nigerian president has directly involved himself in the running of the national team. In 1996, then-president Sani Abacha pulled the team out of the African Cup of Nations after being criticised by Nelson Mandela over political executions.
The teams was banned from the Confederation of African Football because of the withdrawal and were were unable to compete in pan-African competition for two years.
Qualification for the 2012 African Cup of Nations finals begins in September, when Nigeria were slated to play Madagascar.