"Mr President has directed that Nigeria will withdraw from all international football competition for the next two years to enable Nigeria to reorganise its football," Ima Niboro, Jonathan's senior communications adviser, told reporters.
"This directive became necessary following Nigeria's poor performance in the ongoing Fifa World Cup," he said.
Nigeria were knocked out in the first round.
After meeting the country's World Cup organising committee, Jonathan also said the accounts of the committee should be audited.
"If any financial misappropriation is discovered, all officials responsible will be held accountable," Niboro said.
Jonathan's decision came a day after the executive committee of the Nigerian Football Federation (NFF) met to review the team's first round exit, in which they picked up a single point and finished bottom of their group also containing South Korea, Greece and Argentina.
Niboro said the sports minister would be writing to Fifa shortly to inform them of the decision. He said the minister for the federal capital territory, Abuja, had been instructed to build a "Football House" where the team could be based.
"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," Niboro said
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