Instead, the coalition's member parties chose Abiy to become the first Oromo prime minister.
"I am so humbled and thrilled".
Njoelstad said Friday Abiy "was emotionally affected" and said he hoped it could help strengthen peace in the region.
The prize, worth nine million Swedish crowns, or around $A1.35 million, will be presented in Oslo on December 10. Even though the peace prize is awarded in Norway, the amount is denominated in Swedish kronor.
Ethiopian Prime Minister Abiy Ahmed says he shares his Nobel Peace Prize with the African continent.
Where did the conflict between Ethiopia and Eritrea begin? .
Abiy Ahmed took office in April 2018, becoming PM of Africa's second-most populous nation, which also holds tremendous geostrategic importance.
The Nobel Peace Prize is awarded annually to "the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses", as described in Nobel's will.
On Twitter, Jens Stoltenberg congratulated Abiy for the award that was announced Friday in Oslo.
"That also speaks to someone who takes peace and stability in the Horn of Africa seriously", Allo said. "Greta Thunberg not being awarded the Nobel Peace Prize means we can all enjoy a less chaotic news cycle from the volatile toddler in the Oval Office", said Charlotte Clymer of the Human Rights Campaign. "An important premise for the breakthrough was Abiy Ahmed's unconditional willingness to accept the arbitration ruling of an global boundary commission in 2002", the Nobel Committee said in a statement.
Expressing a similar view, Amnesty International said the award "should push and motivate" Abiy to "tackle the outstanding human rights challenges that threaten to reverse the gains made so far".
The organisation said that this should spur Mr Ahmed to enhance reforms in Ethiopia on human rights with ongoing ethnic tensions which "threaten instability and further human rights abuses".
Ethnic violence has been on the rise in recent years, causing Ethiopia to record more internally displaced people than any other country.
Tedros Adhanom Ghebreyesus, the director-general of the World Health Organization, said he was "proud to be Ethiopian" in offering his congratulations to the prime minister.
Some nations are pleased by Abiy's personal touch.
Abiy has been grappling with the displacement of people in different parts of the country, including in Oromia and Amhara regional governments.
He also set free thousands of opposition activists who had been jailed.
In his state visit to Israel in September, Abiy was warmly welcomed by Prime Minister Netanyahu and by President Rivlin-both of whom I had accompanied on state visits to Ethiopia, billed as reciprocal visits for when the Queen of Sheba was welcomed by King Solomon to the Temple in Jerusalem 3,000 years ago.
While the historic peace agreement between Eritrea and Ethiopia was signed in Jeddah, it remains unclear what role the Saudis played in broking the peace deal.
No one in the room had been informed of Abiy Ahmed's trip, his second since clinching a peace deal previous year that ended two decades of hostility between the neighbours.