Tony Blair has confirmed talks are underway with Tanzania about UK officials handling asylum claims there.
Somali refugees in Kenya
Home Office sources also suggested it had discussed sending failed asylum seekers from Somalia to Tanzania.
But Mr Blair has been accused of avoiding questions about reports the UK was offering Tanzania aid in return for taking the failed asylum seekers.
Tanzania's deputy home minister, John Chiligati, told the BBC World Service his country had rejected that idea.
Downing Street says there are also negotiations about asylum in hand with another African country.
Mr Blair told MPs: "We are in negotiations with the Tanzanian government as to how we can
process claims for asylum nearer to the country of origin. That is a sensible
He insisted, however, it would not be a way with dealing with the bulk of asylum claims.
His comments came after the Guardian newspaper said the UK had offered Tanzania £4m if they accepted failed asylum seekers who had come to Britain from neighbouring war-torn Somalia.
Mr Chiligati said a team of Home Office officials had visited
Tanzania last year.
"They put up that proposal that they want a number of refugees to be sent to
Tanzania, and from here they can be sorted out and repatriated to their own
"But that proposal was not accepted by our government because already
we have enough of a refugee problem."
He said that with 700,000 refugees in Tanzania already, it could not accept more from Britain.
"We were negotiating, yes. But we have already given them our answer, a
negative answer. Maybe his [Mr Blair's] officials have not reported back to the government."
Downing Street rejects suggestions the comments leave the plans in confusion, saying Mr Blair and Mr Chiligati were talking about different issues.
A Home Office spokeswoman said talks with Tanzania were in an "early stage".
She refused to comment on the earlier talks about sending back failed Somali
asylum seekers to Tanzania.
But officials were discussing proposals with Tanzania to repatriate Tanzanians who had come to Britain claiming to be
Somalis, she added.
Liberal Democrat leader Charles Kennedy said the idea of offering aid in exchange for accepting failed asylum seekers would set a "very bad precedent" for "a global trade in displaced people".
But he said Mr Blair had answered a very different question by only talking about asylum processing abroad.
The Conservatives claim Mr Blair is copying the idea they launched last year of "off-shore" asylum centres - a charge rejected by the prime minister.
Mr Blair's official spokesman later insisted the main aim of the proposed camps was to process asylum seekers' applications before they travelled to the UK, rather than being somewhere to deport people from the UK.
He added: "It is not a crude cash for people trade-off - but the government has always used money to tackle migration issues."
According to the Home Office there has been an increase in asylum seekers destroying their identity documents on arrival in Britain and claiming to be from Somalia in order to increase their chances of staying here.
Somalia has been wracked with civil war over the past 13 years, although hopes are high that the war may soon be over after an agreement between the main warlords and politicians last month.
More Somalis claimed asylum in the UK last year than any other nationality.