Mr Ford said Magilligan jail in Co Londonderry, which had been marked for closure, will now be retained and will undergo a phased redevelopment.

The work is expected to be completed by 2020.

"Over the last few months, my officials in NIPS have been continuing to engage with a range of stakeholders on this issue," the Alliance minister told the Assembly on Tuesday.

"This has helped shape my thinking and I am now convinced that there is a case for the retention of Magilligan."

A consultation process on the medium to low security prison, which was opened in 1972 and holds male inmates with six years or less to serve, was conducted last year. The Prison Service had wanted to replace it with a new facility closer to Maghaberry Prison in Co Antrim.

The redevelopment will see a new accommodation block built, increasing Magilligan's capacity from 535 prisoners to around 800.

Much of the prison is no longer fit for purpose and has outlived its useful economic life. To this end I am proposing that there should be a phased redevelopment of Magilligan, which will allow the prison to remain open and operate as normal during the construction period.

David Ford

Limavady Borough Council said it is looking forward to speaking to the minister.

"The Magilligan Prison Elected Members Liaison Group was established following the consultation on the Northern Ireland Prison Service's "Outline Estate Strategy 2012-2022" and sat for the first time earlier this month," a statement said.

"Members on the group are keen to then meet with the Minister to explore how the local community can work with the Prison Service to increase the employability of current and released prisoners, to reduce the likelihood of reoffending."

Mr Ford also announced that Hydebank Wood Young Offenders Centre, on the outskirts of south Belfast, will be reconfigured as a secure college.

He explained: "The secure college approach is about raising the value placed on learning and skills and changing attitudes towards offender management through positive engagement and interaction.

"It will enhance existing multi-disciplinary and multi-agency working arrangements and at its heart will be a revised learning and skills curriculum with a key focus on life and employability skills. I anticipate that the new curriculum will be introduced in 2014."

Maghaberry will also be reconfigured, with works on the site to include the development of a new 360-cell accommodation block and high security facility, with work starting in late 2014.

Meanwhile the Prisoner Assessment Unit on the Crumlin Road is to be reopened.

Mr Ford said: "The creation of this additional accommodation will not only ease housing pressures within the prison but will enable the Prison Service, on a phased basis, to reconfigure Maghaberry into three discrete sections, catering for remand prisoners, low to medium-security sentenced prisoners and high-security prisoners.

"In recognition of the importance of managing the difficult transition between prison and community, particularly for prisoners who have served long sentences, I indicated in my November statement my intention to redevelop the prisoner assessment unit located on the Crumlin Road as a 'working out unit' for prisoners approaching the end of their sentence.

"As an interim solution, a business case for the refurbishment of the existing site is nearing completion. Subject to approval of this business case, work will commence later this year."