Energy and Petroleum Cabinet Secretary Opiyo Wandayi / FILEEnergy and Petroleum Cabinet Secretary Opiyo Wandayi has defended the government-to-government (G-to-G) arrangement for importing refined petroleum products, saying it helped shield Kenya from a potential fuel supply crisis.
In a statement on Sunday, Wandayi said the arrangement was introduced in response to severe US dollar shortages that had threatened the country’s ability to secure adequate supplies of refined petroleum products.
He said when President William Ruto’s administration took office in September 2022, the country was facing serious fuel supply challenges, with retail stations operating with minimal or no stocks.
“The objective of the arrangement was to cushion the country from the negative effects of US Dollar liquidity that had almost ground our economy to a halt in 2022. On assumption of office on 13th September 2022, the administration of His Excellency Dr. William Samoei Ruto faced serious security of supply of refined petroleum products with retail stations across operating on minimal or no stocks,” Wandayi said.
Wandayi said the import bill for refined petroleum products stood at about $500 million, accounting for approximately 35 per cent of the country’s total import bill.
He said the dollar shortage forced oil marketing companies to source foreign currency from multiple banks, creating additional demand and putting pressure on the Kenyan shilling.
“OMCs were forced to source US Dollars from multiple banks, creating artificial demand and this led to rapid depreciation of the US Dollar-Kenya Shilling exchange rate recording a 3 per cent depreciation on a day-to-day basis,” he said.
Wandayi said the situation prompted the government to seek an urgent solution to prevent the country’s fuel supply challenges from escalating into a wider economic crisis.
On March 10, 2023, the government entered into Master Framework Agreements with Aramco Trading Fujairah FZE, Abu Dhabi National Oil Company (ADNOC) Global Trading Ltd and Emirates National Oil Company (ENOC) for the supply of refined petroleum products on 180-day credit terms.
Wandayi said the arrangement was intended to ease pressure on the foreign exchange market by allowing the country to pay for fuel imports over an extended period.
“The main objective of the G-to-G arrangement was to alleviate US Dollar liquidity challenges by ensuring accumulation of additional foreign reserves to the tune of US Dollars 500 million per month as the US Dollar demand eased due to the extended credit terms,” he said.
He said the arrangement had also helped ensure consistent fuel supplies, while the freight and premium charges had been renegotiated to reflect changing market conditions.
According to Wandayi, the premium for Super Petrol was reduced from $97.50 per metric tonne at the start of the arrangement to $90 in September 2023 and later to $84 in March 2025.
The premium for diesel fell from $118 to $88 and later to $78 per metric tonne, while that of Jet A1 declined from $114.25 to $111.75 and subsequently to $97 per metric tonne.
“These premiums have remained fixed even during the height of the Middle East crisis when the spot market offers went up to as high as US Dollar 400 per metric ton,” Wandayi said.
He said the G-to-G arrangement had also enabled Kenya to preserve and build its foreign exchange reserves while supporting stability in the Kenya shilling-US dollar exchange rate.
“The G-to-G arrangement underpins the payment for refined petroleum products for the local market in Kenya Shillings backed by a 180-day Letter of Credit,” he said.
Wandayi said the number of banks issuing letters of credit had expanded from KCB Bank to include MCB, I&M Bank, DTB, Stanbic, UBA and Equity Bank.
He described the arrangement as a local response to a local economic challenge, saying it had also strengthened Kenya’s position as a regional logistics hub.
“The G-to-G arrangement has therefore not only been a testimony of local solutions to local problems but has received wide recognition and adoption regionally cementing Kenya as a regional logistics hub,” he said.
Wandayi said the government would continue working with its trading partners to strengthen the Northern Corridor as a key route for supplying refined petroleum products to East Africa and the wider Great Lakes region.
