The government had planned to launch the prestige project in December to make good on a promise by Muhammadu Buhari when he ran for president in 2015. He will seek re-election in February.
"I regret to announce that the Federal Executive Council has taken the tough decision to suspend the national carrier project in the interim," Hadi Sirika, junior aviation minister, said on Wednesday on Twitter after the weekly cabinet meeting.
"All commitments due will be honoured," he said. No reason was given for the decision.
In a separate statement, Sirika said: "The suspension was strategic and had nothing to do with politics."
The airline relaunch was announced in July as part of a plan to improve the country's infrastructure, which has suffered due to decades of neglect and underinvestment. The government maintains that improvement will require private investment.
A private operator was sought to manage the airline, according to a document seen by Reuters news agency.
The operator would enter a public-private partnership with the government, which would own no more than five percent.
The chief executive of Ethiopian Airlines said in August the airline was a frontrunner to set up and manage the carrier.
Nigeria Airways, the original national airline, operated for 45 years until 2003. Air Nigeria, its successor, ran from 2005 to 2012.