President William Ruto’s Cabinet has approved the extension of the government-to-government oil import deal between Kenya and Gulf nations. President William Ruto speaking at a past event. The second extension of the programme ended in December 2024, after it was first extended earlier in the year.
Why Ruto’s administration extended G2G oil deal In a meeting held on Tuesday, December 17, at State House Nairobi, the Cabinet resolved that the agreement eased pressure on the exchange rate, strengthened the shilling and reduced petrol prices. “Finally, the Cabinet has approved the extension of the Government-to-Government (G-to-G) arrangement for the import of refined petroleum products.
“This arrangement has eased the monthly demand for US dollars for petroleum imports, stabilising the shilling-dollar exchange rate at KSh129 from a high of KSh166 and reducing pump prices from KSh 217 per litre of petrol to KSh 177,” read a statement from Presidential Press Unit in part. Why Kenya is tied to G2G oil deal
In an exclusive interview with TUKO.co.ke, Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba explained that the prolonged period was supposed to clear the volume of fuel agreed in the deal. “According to oil market data, the G2G oil import arrangement between Kenya and Gulf nations was pegged on a certain volume, and because of Uganda’s exit, it led to a deficit,” said Chomba.
Chomba noted that the government agreed with the companies to prolong the time to avoid penalties that could arise from the breach of contract. “The estimated volume is 600 million litres of fuel for Kenya plus Uganda,” he said. Earlier, Energy Cabinet Secretary (CS) Opiyo Wandayi also alluded that the deal will only end once the agreed-upon fuel volume in the original contract is exhausted.
Has Kenya planned early exit from G2G oil deal The Cabinet decision came against the government’s commitment to end the deal due to the distortions in the foreign exchange market. In January 2024, the National Treasury disclosed to the International Monetary Fund (IMF) that the government-to-government oil deal had failed.
Former Treasury Cabinet secretary (CS) Njuguna Ndung’u admitted that the deal has caused more distortion in the forex market than the intended purpose, prompting the exit. Kenyans expressed their disappointment, with some poking holes into economic policies leveraged by the Kenya Kwanza government.
by Wycliffe Musalia