A deep-dive investigation into how credit lines, foreign exchange pressures, regional supply chain politics, and mounting legislative scrutiny reshaped East Africa’s oil market.
The Ledger Africa Investigative Desk
NAIROBI — When Ugandan President Yoweri Museveni renewed his critique of regional fuel procurement arrangements, questioning why Kampala was procuring petroleum through intermediaries in Nairobi, it reignited a fierce geopolitical debate. Kenya’s Ministry of Energy quickly issued a robust defence of its Government-to-Government (G-to-G) framework, citing foreign exchange preservation, national energy security, and structured logistics as key achievements.
Behind the political rhetoric lies a crucial question: What does the G-to-G arrangement reveal about how Kenya’s petroleum market works, who captures value along the supply chain, and whether a state-led procurement mechanism can balance balance-of-payments relief with market efficiency?
Centralised import access and the shift in wholesale power
For nearly a decade prior to March 2023, Kenya supplied its domestic market and transit neighbours via the Open Tender System (OTS). Under the OTS, licensed Oil Marketing Companies (OMCs) bid monthly to import fuel cargoes, with the lowest bidder winning the right to supply the entire market. The system was strictly competitive, price-driven, and decentralised, allowing smaller tier-two and tier-three OMCs to occasionally outbid multinational majors.
The transition to the G-to-G model altered this dynamic. Kenya entered into bilateral master sales agreements with state-backed Middle Eastern trading arms: Saudi Aramco Trading Fujairah, Abu Dhabi National Oil Company (ADNOC) Global Trading, and Emirates National Oil Company (ENOC) Singapore.
Rather than import directly through a state organ like the National Oil Corporation of Kenya (NOCK), the international suppliers were required to designate local licensed counterparties to manage clearing, discharge, and pipeline entry. A group of OMCs was selected, including Gulf Energy, Galana Energies, and Oryx Energies Kenya, with subsequent onboarding of One Petroleum, Asharami Synergy, and BE Energy as commercial risks de-risked.
This structure concentrated import execution among a small group of nominated firms. While the open tender allowed over 80 OMCs to participate directly or indirectly, G-to-G funnelled 100 per cent of national import volumes through these chosen local counterparties. This shift redistributed bargaining power from smaller distributors to the nominated tier-one firms, giving them significant volume guarantees and pipeline capacity access.
Executive defence: Direct state-to-producer trade vs. regional brokerage claims
Addressing the diaspora in New York, President William Ruto firmly pushed back against critics and regional assertions regarding middlemen, maintaining that the G-to-G deal eliminated historic brokerage layers by connecting the country directly with producing state entities:
“If there is one thing we got right, it is to make sure that our fuel has no brokers in between. We are dealing with companies that are producers. President Museveni said something about the importation of oil products seven years ago [around 2019]… I don’t know what problem it has. Check the landed costs of petrol products coming to Kenya and going to Uganda; check which one is cheaper. Our fuel products arrive in Mombasa cheaper than the fuel products going to other countries.”
— William Ruto, President of Kenya
President Ruto further emphasised that the model’s reliability and forex-saving structure prompted regional peers—including Malawi and Burundi—to approach Kenya to benchmark the procurement architecture.
Energy and Petroleum Cabinet Secretary Opiyo Wandayi similarly dismissed allegations of foul play, maintaining that the 2023 arrangement strictly involved state-backed international oil companies supplying refined petroleum products on extended credit terms to ease pressure on the forex market.
Former Energy Cabinet Secretary Davis Chirchir previously clarified the operational autonomy given to international suppliers during local counterparty selection:
“The government of Kenya did not select the local oil marketing companies. The international oil companies were asked to select local companies that they were comfortable working with to handle the logistics and credit risk. Luckily, because of our G-to-G, when we noticed the trend was going off, we went back to the international companies and negotiated to bring down the freight and premium.”
— Davis Chirchir, Former Cabinet Secretary for Energy and Petroleum
The core analytical debate remains centred on risk transfer versus cost accumulation. If a nominated OMC assumes balance-sheet risk, structures trade credit, and manages physical loss during transit, its margin represents legitimate remuneration for trade finance and logistics. Conversely, if an entity acts merely as a pass-through desk, capturing a fixed fee per metric tonne while international traders and state banks bear the financial and physical risks, the fee transitions into economic rent extraction.
Divergent freight premiums and landed cost dynamics between Nairobi and Kampala
The core dispute raised by Kampala centred on freight and premium costs—the markups charged above the benchmark Platts product prices to cover ocean transport, insurance, and supplier margins.
At the launch of the G-to-G framework, Kenya’s negotiated freight and premium figures were USD 97.50 per metric tonne for Super Petrol, USD 118.00 for Automotive Diesel, and USD 114.25 for Jet A1. CS Wandayi noted that successive renegotiations with supplier IOCs successfully pushed down these initial benchmarks. Super Petrol was reduced from USD 97.50 per metric tonne at inception, down to USD 90.00 in September 2023, and reaching USD 84.00 per metric tonne by March 2025. Automotive Diesel dropped from USD 118.00 per metric tonne at inception to USD 88.00 in September 2023, eventually stabilizing at USD 78.00 per metric tonne in March 2025. Jet A1 decreased from USD 114.25 per metric tonne at inception down to USD 111.75 in September 2023 and USD 97.00 per metric tonne by March 2025.
The Ministry emphasized that these negotiated rates shielded domestic pump prices from international spot market shocks—where freight costs spiked above USD 400 per metric tonne during Middle East regional crises—while expanding letter-of-credit financing across a wider syndicate of local commercial banks.
However, Uganda bypassed the Kenyan G-to-G conduit by granting sole importation rights to the Uganda National Oil Company (UNOC), which partnered directly with global trader Vitol. Ugandan officials cited lower landed premiums under the Vitol deal, reporting USD 61.50 per metric tonne for Super Petrol, USD 83.00 for Automotive Diesel, and USD 79.25 for Jet A1.
Hon. Dicksons Kateshumbwa, analysing the policy shift for the Ugandan Parliamentary Energy Committee, highlighted the sharp cost divergence between the open tender baseline and Kenya’s sovereign model:
“Under the open tender system, regional premiums were routinely secured around $35 per metric tonne. Moving into the G-to-G arrangement pushed freight and premium figures to as high as $118 per metric tonne for diesel. For Uganda, taking control of national procurement via UNOC was an urgent necessity to eliminate these inflated intermediate costs and insulate our national market.”
— Hon. Dicksons Kateshumbwa, Member of Parliament & Energy Committee Analyst, Uganda
Speaking during a groundbreaking ceremony for a 320-million-litre petroleum storage facility, President Yoweri Museveni revealed that an alert from a Kenyan senator prompted an internal investigation showing Uganda had been purchasing fuel via intermediaries at inflated rates—with price markups cited at up to 69 per cent:
“I had to come in and say, this must end. And it ended. Why should our oil marketing companies buy from middle-men in Kenya who add margins that end up hurting consumers? We decided to buy directly from producers.”
— Yoweri Museveni, President of Uganda
Structural comparison of procurement frameworks
A lower freight and premium figure does not automatically equal a lower landed cost at the pump. Premiums reflect a bundle of commercial terms, as detailed below.
| Factor | Kenya G-to-G Model | Uganda / UNOC-Vitol Model |
| Credit Structure | 180-day deferred payment terms | Standard 30-to-60 day commercial terms |
| Financing Premium | Embedded interest cost for carrying debt for 6 months | Lower interest carrying charge due to shorter duration |
| Volume & Scale | Supplies entire Kenyan domestic market plus transit flows | Covers Ugandan national demand (~2.5bn litres/yr) |
| Counterparty Risk | Sovereign-backed system via participating commercial banks | UNOC state balance sheet backed by Vitol trade facility |
The higher initial premiums under Kenya’s G-to-G deal were essentially financing charges. International suppliers pricing fuel on a 180-day credit window build the cost of capital into the premium. Comparing a 180-day deferred cargo premium against a 30-day cash-settled premium without unbundling the financing cost distorts the underlying pricing economics.
Macroeconomic trade-offs of the 180-day deferred settlement mechanism
The fundamental objective of the G-to-G model in early 2023 was currency stabilisation rather than fuel discount optimisation. In late 2022 and early 2023, Kenya faced severe foreign exchange constraints. Petroleum imports required roughly USD 500 million per month, representing approximately 35 per cent of the country’s total import bill. Under the old OTS model, local OMCs were forced to enter the spot FX market simultaneously every month to buy US dollars, driving sharp depreciation of the Kenya shilling (KES).
President William Ruto defended the decision as a vital macroeconomic shield designed to prevent structural currency collapse:
“Through the government-to-government fuel supply framework, we have secured guaranteed fuel supplies despite global supply chain disruptions, ensuring uninterrupted fuel availability across the country. The arrangement has guaranteed supply even when we have disruptions and has made it possible for us to pay on terms that do not put pressure on our dollar reserves. Without it, the country’s situation would be much worse.”
— William Ruto, President of Kenya
Central Bank of Kenya Governor Kamau Thugge similarly highlighted how removing spot market pressures reshaped domestic banking liquidity:
“The G-to-G arrangement succeeded in removing the monthly demand of about 500 million dollars from the spot market, which was creating severe distortion and pressure on the Kenya shilling.”
— Dr. Kamau Thugge, Governor of the Central Bank of Kenya
Financial analysts at Stanbic Holdings PLC noted in their market updates that while the 180-day deferred structure provided essential short-term relief, it created an explicit liquidity trade-off:
“The G-to-G credit line acted as a vital stabilisation bridge for the domestic currency by removing immediate spot FX demand. However, structuring petroleum imports on 180-day deferred terms does not erase foreign exchange obligations—it concentrates them into deferred maturity windows. The macroeconomic benefit relies entirely on whether the central bank can sufficiently build foreign exchange reserves before those letters of credit mature.”
— Stanbic Holdings PLC, Financial Market Analysis
The 180-day deferred structure functioned as a macroeconomic bridge loan. It gave the Central Bank of Kenya a six-month grace period to rebuild foreign exchange reserves without spot oil transactions draining dollar supply. Under this system, local OMCs pay their nominated counterparties in Kenya shillings, while participating commercial banks—including KCB Bank, Equity Bank, Stanbic, I&M, DTB, UBA, and MCB—back these deposits with 180-day Letters of Credit issued to international suppliers.
However, the 180-day credit model defers FX demand rather than eliminating it. When the LCs mature after six months, the accumulated dollar obligation must still be settled. The model successfully reduced spot FX volatility, contributing to the stabilisation of the shilling, but this stability carried an implicit cost in the form of higher freight and product premiums.
Commercial distribution and margin capture across market tiers
To understand who benefits economically from the G-to-G framework, we must break down the financial flows across the value chain. International suppliers capture the benchmark Platts product price alongside the embedded financing margin within the freight and premium structure. Meanwhile, participating issuing banks capture fees for issuing and confirming 180-day Letters of Credit, alongside spreads on eventual foreign exchange settlement.
Nominated local counterparties receive allocation fees, handling charges, and wholesale margins for clearing cargoes and distributing fuel to non-nominated OMCs. Conversely, non-nominated local OMCs pay wholesale prices to the nominated counterparties, effectively transferring a portion of their historical margin to the primary import syndicate. At the end of the chain, domestic retail consumers pay a regulated retail pump price that reflects the underlying landed costs, financing premiums, and statutory taxes.
Price calculation mechanisms and regulatory transparency at the pump
The Energy and Petroleum Regulatory Authority (EPRA) regulates Kenya’s monthly petroleum prices using a cost-plus formula.
In its policy analysis on EPRA’s pricing framework, the Institute of Economic Affairs (IEA Kenya) pointed to growing structural costs embedded within consumer pricing:
“EPRA’s pricing formula is systematically expanding through guaranteed margin allocations and statutory levies. By doubling VAT to 16 per cent and expanding margin buffers for oil marketers, the regulatory structure operates as a guaranteed cost-plus system. Consumers bear the cumulative weight of statutory ratchets, import premiums, and financing fees, while market risks are effectively passed entirely down to the retail buyer.”
— Institute of Economic Affairs (IEA Kenya), Policy Research Report
EPRA Director General Daniel Kiptoo clarified how international cost inputs flow into statutory retail reviews:
“The increase in pump prices is purely on account of the spike in international prices and landing costs. Our role is to ensure fair pricing, and that includes passing down international cost implications, whether they are increases or reductions. Every cost parameter in the pricing formula—from freight to transportation margins—is systematically evaluated.”
— Daniel Kiptoo, Director General of EPRA
EPRA Director of Economic Regulation Dr John Mutua also acknowledged the financial trade-offs inherent in the state-backed model during public regulatory reviews:
“The shift from the Open Tender System to a government-to-government procurement arrangement with international suppliers has helped stabilise fuel supply but has also introduced higher premiums. The pricing model must balance affordability for consumers while sustaining the entire petroleum supply chain.”
— Dr. John Mutua, Director of Economic Regulation, EPRA
The cost components calculated in EPRA’s monthly reviews consist of the Cost and Freight landed price, based on the average Platts benchmark price for the preceding month plus the negotiated G-to-G freight and premium. Financing costs are indirectly incorporated into the landed cost via the negotiated premium, while pipeline and storage charges consist of regulated tariffs paid to the Kenya Pipeline Company (KPC) for transport from Mombasa to inland depots. Taxes, duties, and levies represent a substantial portion of the pump price, including Excise Duty, Value Added Tax, Road Maintenance Levy, and the Petroleum Development Levy. Finally, marketer margins are regulated wholesale and retail margins set by EPRA to cover distributor operating costs.
While EPRA publishes a breakdown of the monthly pricing formula, the specific cargo-by-cargo financing parameters, interest calculations, and exact allocations among nominated counterparties remain opaque, sparking calls for broader public disclosures.
Escalating legislative pressure and industry calls for forensic audits
The debate surrounding the G-to-G structure took a dramatic turn following fresh political revelations that thrust parliamentary oversight and industry accountability back into the spotlight.
Kisii Senator Richard Onyonka publicly called on the Energy Committees of both the Senate and the National Assembly to immediately convene special joint sessions to unmask the full operational reality of the petroleum deal:
“It is the responsibility of the Energy Committee in the Senate and the National Assembly. By now, they should have called a meeting, an extra, special meeting to try and explain to Kenyans. Do we actually have an agreement? What are we buying our fuel at? For me, it’s a long call, but sometimes we need the truth. Why can’t we have the Energy committees sit down and actually interrogate this thing because Kenyans are losing a lot of money?”
— Richard Onyonka, Senator for Kisii County
Senator Onyonka’s intervention followed disclosures referencing former politician Cyrus Jirongo as an early figure who raised concerns over regional fuel brokerage around 2019. Onyonka noted that Parliament has a duty to verify supply chain mechanics, adding that conversations held with insiders at the Kenya National Oil Corporation (NOCK) raised serious structural questions regarding how the deal was assembled and executed.
Echoing these concerns, industry stakeholders—including the Motorists Association of Kenya—raised fresh concerns about how petroleum products are sourced and priced, urging EPRA and parliamentary bodies to facilitate a comprehensive forensic audit.
From an economic policy perspective, Peter Mbae, Secretary for Planning and Economic Affairs at the Democracy for the Citizens Party (DCP), argued that private intermediaries introduced vested interests into what was framed as a purely bilateral deal:
“Hiyo mpango intention yake ilikuwa safi ya kuwa ni serikali mbili zinafanya biashara (The original intention was clean—two governments doing business directly). But the moment you bring private brokers into a state-to-state framework, you create vested interests. Removing these private intermediaries could reduce petroleum import premiums and logistics costs by up to 40 per cent.”
— Peter Mbae, Secretary for Planning & Economic Affairs, DCP
Divergent policy paths for shared northern corridor infrastructure
Two nations relying on the same northern corridor infrastructure arrived at divergent procurement strategies. The underlying divergence stems from contrasting macroeconomic realities. In early 2023, Kenya faced an acute FX liquidity squeeze, making the 180-day credit window a policy priority. Uganda, operating with different balance-of-payments considerations, prioritised direct price optimisation and domestic state control via UNOC over extended trade credit terms.
Strategic utility of port and pipeline assets in landlocked logistics
Kenya’s petroleum infrastructure—comprising the Port of Mombasa, Kipevu Oil Terminal, and KPC’s pipeline network—serves as the primary energy gateway for East Africa.
Testifying before the National Assembly Departmental Committee on Energy during legislative inquiries into regional pipeline access, Kenya Pipeline Company leadership outlined the strategic balance:
“The Kenya Pipeline Company maintains world-class transport and storage infrastructure designed to serve the entire East African hinterland. Our mandate is to guarantee non-discriminatory pipeline access and operational efficiency for all throughput, whether destined for domestic consumption or regional transit markets. Infrastructure capacity remains fully aligned with regional energy security requirements.”
— Kenya Pipeline Company (KPC) Parliamentary Submission
When Kenya introduced the G-to-G model, transit exports were integrated into the primary allocation system. Landlocked neighbours expressed concern that their national fuel costs were subject to Kenya’s domestic financing arrangements, leading Uganda to push for independent importation rights and direct pipeline capacity allocations.
Kenya’s infrastructure assets provide structural advantages, but using state policy to channel regional transit volumes through specific local procurement frameworks pushed neighbouring states to seek alternative arrangements, altering regional trade dynamics.
Governance benchmarks and core disclosure imperatives
Assessing the G-to-G model requires evaluating governance mechanisms and identifying key areas where enhanced disclosure is needed. First, the full terms and clauses of the Master Sales Agreements entered into with Aramco, ADNOC, and ENOC should be made public. Second, objective, verifiable criteria used in selecting and vetting local nominated OMCs must be disclosed. Third, independent financial audits verifying the exact breakdown between physical freight charges and embedded 180-day financing fees are required. Fourth, a complete register of beneficial ownership for all nominated counterparty firms and their subsidiaries should be published. Finally, detailed disclosures regarding Letter of Credit issuance fees, bank confirmation costs, and FX conversion margins charged by participating lenders must be made accessible.
Without complete transparency around these operational components, the public and market participants cannot fully evaluate whether the premiums paid reflect true credit and market costs.
Evaluating the trade-offs of state intervention in energy trading
The G-to-G petroleum architecture highlights the economic trade-offs inherent in state-led market interventions. Introduced as an emergency response to dollar scarcity, the 180-day credit arrangement served its immediate macroeconomic purpose: it alleviated spot market pressure on foreign exchange reserves and helped stabilise the Kenya shilling.
However, achieving that short-term stability came at a cost. The structure concentrated commercial access among a select group of nominated counterparties, embedded capital financing charges into fuel premiums, and strained regional trade relations.
Ultimately, Kenya’s G-to-G arrangement was less about revolutionary fuel procurement and more about executing a structured trade finance line. As global commodity markets normalise, parliamentarians demand unredacted contracts, and foreign exchange liquidity improves, the core rationale for emergency credit terms diminishes. Moving forward, transitioning back toward open, market-driven competition, removing unnecessary intermediary desk fees, and providing complete contractual transparency remain essential to ensuring efficiency, lowering consumer costs, and preserving Kenya’s status as East Africa’s primary energy hub.
