Kenya Extends Oil Supply Deal With Gulf Firms to Stabilize Currency

KEY POINTS 

• Kenya extends oil supply deal with Gulf firms to stabilize its currency.
• The 180-day credit terms ease forex pressure and support Kenya’s shilling.
• The agreement also helps reduce pump prices for Kenyan consumers.

Kenya has extended its oil supply deal with three Gulf-based firms,  Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), and Emirates National Oil Company. 

The arrangement, initially signed in March 2023 and extended in September, has now been renewed once more, although the new duration has not been disclosed.

The Kenyan Cabinet, in a statement after its latest meeting, announced the extension but did not specify how long the deal would last. 

The government highlighted the positive impact the agreement has had on stabilizing the shilling against the U.S. dollar and reducing pump prices for consumers.

“This arrangement has eased the monthly demand for U.S. dollars for petroleum imports, stabilizing the shilling-dollar exchange rate,” the Cabinet said in its statement.

180-day credit terms reduce forex pressure and stabilize currency

Unlike Kenya’s previous open-tender petroleum procurement system, which required local firms to bid to import oil every month, the Gulf oil supply deal allows Kenya to pay for petroleum imports over 180 days.

 This delayed payment structure gives Kenya more time to accumulate U.S. dollars, relieving pressure on its currency and easing demand on the foreign exchange market.

Under the old system, Kenya had to make upfront payments of about $500 million each month to finance oil imports. This placed significant strain on the shilling and contributed to its devaluation against the dollar. 

With the 180-day credit terms offered by Saudi Aramco, ADNOC, and Emirates National Oil Company, Kenya has been able to stagger payments, strengthening its financial position.

According to Reuters, the government lauded the credit arrangement as a key pillar of its economic strategy, with officials citing reduced currency volatility as a major benefit.

Deal supports lower pump prices and stabilizes domestic market

In addition to stabilizing the shilling, Kenya’s oil supply deal with Gulf firms has also provided relief at the pump. 

According to the Kenyan Cabinet, the agreement has contributed to lower fuel prices for consumers. 

By reducing immediate forex demands and allowing delayed payments, the country has been able to absorb market shocks more effectively, keeping pump prices stable.

The original deal, signed in March 2023, was meant to support Kenya’s economic stability amid ongoing currency volatility. 

As the extension is now in place, industry analysts believe the government is prioritizing currency stability, affordable pump prices, and enhanced energy security.

Kenya’s renewed partnership with Saudi Aramco, ADNOC, and Emirates National Oil Company signals a sustained effort to ensure stable fuel prices, reduce forex strain, and support the overall economy.