Nigeria has approved a phased plan to refinance 4-trillion naira ($2.61-billion) in electricity sector debt to help stabilise the nation's ailing power industry and improve supply, its finance minister said.

The debt, primarily owed to 27 power generation companies for outstanding invoices between 2015 and 2023, has stifled investment in the industry and exacerbated chronic power outages in Africa's most populous nation.

President Bola Tinubu pledged to settle the claims following a recent verification. He approved the plan on Wednesday.

Speaking after a cabinet meeting in the capital Abuja, finance minister Olawale Edun said the refinancing would be executed within three to four weeks under the oversight of the debt management office.

"It is now fully approved, and we move to implementation," Edun said.

The plan will likely involve bond issuances and other instruments to spread out the repayment liability over time.

This aligns with broader sector reforms, including a 35% cut in electricity subsidies and tariff hikes for urban consumers, measures expected to save the government around 1.1-trillion naira, or around $718.58-million, annually.