The 112-bed annex in the notorious KiriKiri prison in Lagos would enable eligible Nigerian inmates serving time in the UK to return home to complete their sentences, the agreement signed in 2014 also applies to UK citizens who commit crimes in Nigeria to serve their sentences in their home country.
According to Ministry of Justice figures, there were 320 Nigerian prisoners in British jails at the end of 2016, accounting for 3% of the foreign prisoner population.
The Nigerian prison extension will be paid for out of the government's Conflict, Stability and Security Fund, which provides development and security support to countries which are at risk of conflict or instability.
Foreign Secretary Boris Johnson said the move would help "improve the capacity" of the Nigerian prison service.
"The provision of this assistance is in line with the government's security and stability objectives in West Africa," he added in a written statement to Parliament.
No mention was made on the funding the running and maintenance of the prisons.