Mr. Obi, a well-known ally of President Goodluck Jonathan, lost out Wednesday as the president named the Corps Marshal of the Federal Road Safety Corps, Osita Chidoka, as a new minister in Mr. Obi's stead.
Mr. Chidoka is likely to head the aviation ministry, left vacant for about five months since the removal of former minister, Stella Oduah, over allegations of abuse of office.
Even for what has seemed a relatively popular decision, Mr. Osita's emergence came as surprising to many, after months of political intimacy between Mr. Jonathan and former Governor Obi, fuelled speculation the governor would retire to a ministerial role.
As a member of the opposition All Progressives Grand Alliance, APGA, Mr. Obi maintained an unusual closeness with the president for months, and at some instances, secured from the president federal benefits reportedly reserved by Mr. Jonathan for PDP governors.
Presidency insiders and close associates told PREMIUM TIMES the former governor was edged out of the race to becoming a minister in an elaborate scheme by powerful members of the Peoples Democratic Party, PDP, in Anambra state.
Those who led the campaign against his candidacy were the PDP's billionaire financiers, Authur Eze and Emeka Offor; a serving senator, Andy Uba, and the former minister of aviation, Ms. Oduah, the insiders said.
According to officials well briefed about the president's decision, those opposed to Mr. Obi's nomination seized on the former governor's membership of the opposition APGA, a party which Mr. Obi successfully led to victory in Anambra State's recent governorship election.
Willy Obiano, an ally of Mr. Obi, was elected governor.
In intense lobbying that lasted weeks, our sources said the PDP chiefs told President Jonathan that handing Mr. Obi a ministerial slot, in addition to his control of the state machinery through Mr. Obiano, would be a costly error that might backfire.
Under such arrangement, they argued, PDP supporters at the lowest rungs of party structure in the state, would feel "demoralised", and that that could prove risky for Mr. Jonathan's all but certain plan to seek re-election in 2015.
"The president like Peter Obi a lot," one of our sources said. "He ran a lot of political errands for the president in the past and he really wanted to appoint him. "But he did not envisage the kind of overwhelming protests that came. Key Anambra stakeholders didn't want him and at a point, the president had to buckle."
Our sources said the party leaders told the president that there would be no incentive at the state level if Mr. Obi retained control of state government, and also secured the ministerial position.
But while the PDP leaders pushed, they were responded to by the former governor who also launched an extensive effort to clinch the seat.
Mr. Obi's campaign was led by Uche Ekwunife, a member of the House of Representatives, our sources said.
For weeks, Ms. Ekwunife's brief was to secure the backing of federal lawmakers from Anambra state, mostly the senators, who would have to screen and confirm the former governor if nominated by the president.
But in his decision that became public Wednesday, Mr. Jonathan named Mr. Chidoka to the post, a choice said to have surprised even the FRSC boss.
Our sources said given his current position as head of the road safety agency, Mr. Chidoka himself had rooted for Chudi Ofodile, a former House member, who was also touted for the ministerial position.
Other names considered by the president were former senator, Ben Obi, and former lawmaker, Jerry Ugokwe.