The game had ended 1-1 at regulation time and required the spot kicks to determine the winners but midfielder Aniekeme Okon's penalty miss proved damaging.
Mamadou Traore broke the deadlock in the 78th minute but Nigeria's substitute Paschal Durugbor restored parity in the 85th minute which sent the game into extra-time and eventually penalties.
Nigeria will now face the loser of the second semifinals clash between Senegal and South Africa which was delayed.
The defeat by Paul Aigbogun's team means there will be a new winner of the tournament with the Eagles having won it a record seven times.
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