(3 minutes read)
In a bid to ease pressure on dollar demand, Kenya has entered into an agreement with the United Arab Emirates to import fuel on the credit of up to one year.
In a bid to ease pressure on dollar demand, Kenya has entered into an agreement with the United Arab Emirates to import fuel on the credit of up to one year. Disclosing the news, Energy and Petroleum Cabinet Secretary Davies Chirchir said that the government-to-government deal starting next month will see Kenya import 30 percent of its monthly fuel requirements through the State-owned National Oil Corporation (Nock). Abu Dhabi National Oil Company (Adnoc) — the State-owned oil company of the United Arab Emirates — will be supplying the fuel.
With oil shipments accounting for 28 percent of Kenya’s monthly imports, Kenya has been facing a severe crisis in the foreign exchange market. The imports from UAE through a credit of six months and a year are expected to ease the crisis. The Energy Ministry said that the importation of fuel on credit is mainly aimed at propping up the shilling against the dollar. Chirchir explained that the products in April and May will come with more government support and deferred payments that will significantly reduce the pressure on the dollar.
The effect of the shipment on fuel prices in the Kenyan market is to be seen. Daniel Kiptoo, the director-general of the Energy and Petroleum Regulatory Authority (Epra) told the press that the effect on pump prices will be known once the bids are opened and evaluated.
Currently, oil dealers buy petrol and diesel from several refineries to feed the Kenyan market, eroding the benefits of economies of scale. The change over from spot purchases to a term contract could benefit from economies of scale, according to Kiptoo. Political observers are of the view that the deal is aimed at easing the crisis in the currency market rather than lowering petrol and diesel prices.
Also Read;
http://trendsnafrica.com/currency-fluctuations-deepen-kenyas-economic-crisis/
Kenyan shilling on March 1st hit a new all-time low against the greenback after breaking below the 127-per-dollar mark, making imports of cars, electronics, and machinery costlier. The scarcity of dollars has impacted the manufacturing sector.
