Wed. Oct 4th, 2023
    Kenya Extends Oil Supply Deal to Manage Demand for Dollars

    In a bid to manage demand for dollars, Kenya has extended its oil supply deal with three Gulf-based companies. The deal, entered into in March, involves Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company. Previously, local companies bid to import oil on a monthly basis through an open tender system. However, the new deal aims to lower transportation costs and the premium paid to suppliers.

    The extension, set to last until December 2024, was reached after negotiations to reduce freight and premium costs. The arrangement also includes 180-day credit terms, enabling Kenya to gradually accumulate funds for oil imports instead of needing around $500 million every month.

    Currency traders, however, remain skeptical about the deal’s effectiveness, suggesting that it merely postpones demand. While the Kenyan shilling has been under pressure from the dollar, its depreciation rate has slowed in recent months. Critics attribute the increased retail prices of petrol to the government’s oil import agreement, where the government acts as the guarantor.

    At present, petrol is being sold for 211 Kenyan shillings ($1.43) per liter, up from 160 shillings a year ago. The government’s decision to double fuel taxes in July has also contributed to the surge in prices. While government officials argue that international oil prices are to blame, opposition parties disagree.


    – Reuters: “Kenya extends oil supply deal to manage demand for dollars”

    – Thomson Reuters Trust Principles