A French businessman suspected by investigators of funnelling money from former Libyan leader Muammar Gaddafi to finance Nicolas Sarkozy's successful 2007 presidential campaign was granted bail when he appeared at a London court on Wednesday.

Alexandre Djouhri, 58, was arrested at London's Heathrow Airport on Sunday on an international arrest warrant issued by France.

He appeared at Westminster Magistrates Court to apply for bail which was granted on condition that he pays security of £1 million, surrenders his passport, lives in a specified area of London and reports to police daily.

A full extradition hearing will start on April 17.

Sarkozy, who served as president from 2007 to 2012, has always denied receiving any illicit campaign funding and has dismissed the Libyan allegations as "grotesque".

Djouhri opposes extradition to France. His lawyer Mark Summers said there was a "political genesis" to the allegations against him and noted that a French inquiry into them has been running for several years with no decision having been made to charge anyone.

"As far as the main allegations are concerned, the understanding is that there hasn’t been any evidence uncovered," Summers told the court.

He said that Djouhri, who holds joint French and Algerian nationality, is a company director of a firm that deals with sanitation, water treatment and solar energy, earning about £200,000 a year and has been based in Switzerland since the 1990s.

According to French media reports over the years, Djouhri had a long career acting as a discreet intermediary between business and political figures in France and North Africa.

Sarkozy has been ordered to stand trial in a separate campaign finance investigation related to events in 2012, when he ran for a second term but was defeated by Francois Hollande.