Kenya reveals an end to G2G oil supply deal

The Kenyan Government is set to exit its Government to Government (G2G) deal that it had launched back in April 2023. 

The G2G oil supply deal was an agreement between Kenya and three national oil exporters from the Gulf, and it was launched by Kenya’s president William Ruto last spring in a bid to stop the free fall of the Kenyan Shilling against foreign currencies.  

A recent report from the International Monetary Fund (IMF), the Treasury said that the scheme has not worked as it hoped. 

According to the reports, Treasury is quoted as saying: “The government intends to exit the oil import arrangement, as we are cognizant of the distortions it has created in the FX market, the accompanying increase in rollover risk of the private sector financing facilities supporting it and remain committed to private market solutions in the energy market.”  

The arrangement represented a departure from the previous open tender system, where local firms competed to secure the monthly oil import contract. Originally slated for a nine-month duration, the deal was later extended for an additional 12 months until December 2024.  

However, it has now been decided that the arrangement will be concluded after this date. Throughout the implementation of this initiative, the local currency, the shilling, has experienced a depreciation exceeding 20% against the US dollar, surpassing the historic low of 160 shillings to the dollar. 

Reflecting on the 6-month period following the initiation of the G2G deal in Mar/Apr 2023, it's evident that it was a crucial missed opportunity for Kenya.

This period could have been pivotal in strengthening our economic stance through increased exports. pic.twitter.com/wrZzuFV5Qe

— Mwango Capital (@MwangoCapital) January 19, 2024