Kenya extends G-to-G fuel importation deal as global crude prices fluctuate

The government has secured an extension to its crucial deal with Saudi Aramco, the Abu Dhabi National Oil Corporation (ADNOC), and the Emirates National Oil Company (ENOC) to continue importing refined petroleum products on a government-to-government (G-to-G) basis.

The Government says the extension, approved by the Cabinet, aims to further stabilize the Kenyan shilling and mitigate the impact of global oil price fluctuations.

The original deal, signed in April 2023, allowed Kenya to import fuel on a 180-day credit period, reducing the immediate dollar demand and easing pressure on the local currency.

The Ruto administration argues that since its implementation, the G-to-G arrangement has contributed to a significant recovery of the Kenyan shilling, which had plunged to a low of 160 units to the dollar earlier in 2024.

The currency, the government says, has since appreciated to a high of 129.27 units to the dollar, thanks in part to the reduced foreign exchange pressure.

However, while the deal has provided much-needed relief, concerns have emerged regarding the impact on consumers.

Despite falling global crude oil prices, local fuel prices at the pump have not seen a commensurate decrease.

This is due to fixed premiums imposed by the three Kenyan oil firms importing the fuel, which limit the potential for price reductions at the pump.

While the government has been subsidizing diesel to soften the blow for consumers, questions remain about the long-term sustainability of this approach and its impact on public finances.

As Kenya continues to navigate the complex global energy landscape, the extension of the G-to-G deal offers a temporary respite, but the country must explore additional strategies to ensure a sustainable and affordable energy future.