"Our client proposes to offer Sg$5,000 ($4,000) as damages to the Prime Minister," Roy Ngerng Yi Ling's legal counsel M. Ravi said in a letter to Lee's lawyer.
"The sum of Sg$5,000 is based on our client's modest living and income that he derives from working as a healthcare worker," Ravi wrote in the letter, released to the media.
Lee's lawyer Davinder Singh last week demanded an apology and compensation from 33-year-old Ngerng for a May 15 article seen as accusing the premier of corruption.
Singh had said the commentary, penned by Ngerng and posted on his blog The Heart Truths, implied that "Lee Hsien Loong, the Prime Minister of Singapore and the chairman of GIC, is guilty of criminal misappropriation of the monies paid by Singaporeans to the CPF (Centl Provident Fund)".
GIC is a sovereign wealth fund that manages more than $100 billion of the city-state's foreign reserves. CPF is the state pension fund.
Ngerng has said the article was meant to call for greater transparency on how the pension fund is invested by the government through its two sovereign wealth firms.
He took down the articles and links to it, and on Friday apologised unreservedly, while urging Lee not to seek damages.
However, Singh rebutted Monday that his apology "was not and never meant to be genuine" after Ngerng circulated a YouTube video over the weekend where he spoke about his legal predicament.
Singh said the blogger was "opportunistically" using the case to gain sympathy and renew his attacks against Lee, and that the the prime minister was entitled to "aggravated damages".
Singh did not immediately respond to an AFP request for comment on whether Lee would accept Ngerng's offer of damages.
Singapore has ranked top in surveys as one of the world's least corrupt countries, but international human rights groups have regularly accused its leaders of using financially ruinous libel actions to silence critics and political opponents.
Singaporean leaders, including Lee and his father, former prime minister Lee Kuan Yew, have countered that the lawsuits are necessary to protect their reputations.
Manpower minister Tan Chuan-Jin last year accepted an offer of Sg$5,000 from a local opposition politician who had written a defamatory Facebook post about him. (AFP)
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