In the spring of 2023, Kenya quietly signed a government-to-government (G2G) oil import deal with three Gulf oil majors. Saudi Arabia’s Aramco Trading and the UAE’s ADNOC and ENOC agreed to ship refined fuel to Mombasa on a six-month credit plan.
Officially, the scheme was meant to arrest Kenya’s dollar shortage and prop up the sagging shilling. Indeed, by late 2024 the shilling had strengthened from 160 to around 129 to the dollar, and industry players credit the deal with easing hard-currency demand and even pushing down pump prices.
As one petroleum industry veteran put it, “The G2G fuel import deal has already brought relief…by easing pressure on the US dollar, stabilizing the Kenyan shilling, and helping drive down pump prices.” To ordinary motorists facing rising prices, this glimmer of benefit was tangible.
The End of Competitive Tendering
The architecture of the deal was novel for Kenya. Instead of the usual open tender system (OTS), where local oil marketers competitively bid each month, the government handpicked three Kenyan importers and let the foreign suppliers choose them.
Under new petroleum regulations issued in early 2023, any G2G import is “deemed to have occurred through the open tendering system,” effectively side-stepping competitive bids.
In practice the foreign oil firms simply nominated their Kenyan partners (Gulf Energy, Galana Oil, Asharami One, Oryx Energy, etc.) to handle shipments.
“Three of those nine [licensed importers] have been nominated by the international oil companies,” EPRA’s director Daniel Kiptoo told Parliament, and while others could theoretically enter later, the initial arrangement “appear[ed] to have nothing competitive.”
Critics immediately flagged this as a legal sleight of hand. By exempting bilateral contracts from procurement law, the G2G deal effectively installed a mini-monopoly, reserved for politically connected firms and their Gulf partners.
180 Days of Deferred Risk
The mechanics deepened the opacity. Under the deal, local importers take ownership of the fuel at the Kipevu terminal, paying in shillings from domestic marketers.
These shillings are held in escrow by Kenyan banks; only after 180 days can the dollars be released to the Gulf suppliers. In theory, this 6-month credit eases Kenya’s immediate need for hard currency. In reality it creates hidden debt and contingent obligations.
The International Monetary Fund warned that taxpayers’ exposure could reach about $400 million (roughly 0.4% of GDP), since 10% of the total private-sector letter-of-credit guarantees could become government liability.
By mid-2023, Kenya had imported some $3.7 billion under the G2G scheme, with letters of credit worth over $784 million already drawn.
Put bluntly, the government tacitly guaranteed hundreds of millions in fuel finance, eroding fiscal buffers to keep the scheme afloat.
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Buy on AmazonA Public Supply Gap
In parliamentary hearings and audits, this arrangement has come under heavy fire. MPs and auditors note that even after the deal, Kenya still falls short by 220,000 metric tons of fuel per month.
The Auditor-General’s 2023 report found that “the aggregate supply qualified for all importers amounted to 730,000 tonnes monthly, while the assessed national requirement was 950,000 tonnes.” A ”gap of over 20%.
Yet the G2G contracts made no plan for this shortfall. Instead, a disputed 100,000-ton diesel cargo languished in port, tangled in court. In January 2024, The Nation reported on an alleged rogue deal for that Sh17 billion shipment, suggesting an elaborate scheme of questionable tender awards.
Opposition leaders, notably former PM Raila Odinga, publicly accused the energy minister and finance minister of “criminal offenses” related to this diesel delivery, arguing that funds were diverted to a private firm (Ann’s Import & Export) outside any tender.
The Auditor-General added that a key provision of the MoU, that the Kenyan government should nominate local importers, “was not adhered to.” In sum, Kenya was borrowing dollars to buy fuel, but the who and how of that process was murky and uneven.
Even with the G2G scheme, Kenya still needed monthly open-tender imports to fill a 220,000-tonne fuel gap. Critics warn that the government’s guarantees may leave taxpayers holding the bag for hundreds of millions in contingent liabilities.
From Strong Shilling to Shadow Debt
On the financial side, early gains for the currency may have deep costs. The Treasury quietly admitted to the IMF that the G2G deal “failed to ease foreign exchange pressures.” In fact, by mid-2023 the shilling had weakened by 20% against the dollar despite the scheme.
Treasury officials now acknowledge “distortions” in the FX market and higher rollover risk and plan to exit the arrangement. One Kenyan banker noted that critics view the deal as a way to socialize risk.
Local OMCs pay in shillings and sit on foreign liabilities, while the Treasury quietly underwrites the obligation.
In parliamentary questions, senators demanded to know who the guaranteed banks are and how much the country owes to the oil majors. Several ministries (Energy, Treasury, Petroleum) have declined full disclosure, arguing the contracts are governed by English law and arbitration in Dubai.
But Kenyans remain uneasy. As one analysis put it, the deal “has not worked as it hoped,” with supply lags and currency slippage prompting plans for a swift exit.
Regional Fallout and Gulf Leverage
Geopolitically, the ramifications are broad. In the short run, the G2G model helped Kenya stave off a foreign-exchange crisis.
Fuel imports on cash-and-carry open tenders had been draining $500 million a month, forcing the shilling down. By eliminating that immediate drain, Kenya won some breathing room.
Indeed, Business Daily notes the deal “has partly helped prop up the shilling.” But the cost has been strained relations with neighbors. Uganda, which had been part of the deal in late 2022, ultimately abandoned the Kenyan route, opting for a government-backed deal with Tanzanian supplier Vitol.
Analysts say Kampala was frustrated with delays and profit-chain inefficiencies under G2G, and even sued Kenya in the East African Court of Justice for a lack of pipeline access.
Meanwhile, Rwanda has quietly signaled interest in joining Kenya’s fuel corridor, creating a new train of politics between Mombasa and regional capitals. On the other hand, Kenya’s deepening ties with Gulf producers have strategic value.
President Ruto has visited Riyadh thrice since 2022, and trade with the UAE and Saudi is booming.
In April 2025, Reuters reported that Kenya extended the G2G contracts through 2027 and even renegotiated lower price premiums, emphasizing the ongoing Gulf influence in Nairobi’s energy sector.
Pump Prices, Subsidies, and the Silent Burden
| Date | Super Petrol (KSh/L) | Diesel (KSh/L) | Context |
|---|---|---|---|
| 15 Apr 2024 | 193.84 | 180.38 | Pre-G2G pricing under open tender system. |
| 15 Jun 2024 | 189.84 | 173.10 | Early effects of G2G deal begin to ease FX pressure. |
| 15 Nov 2024 | 180.66 | 168.06 | Stable pricing maintained despite drop in monthly cargo volumes. |
| 30 Jun 2025 | ~175.93 | 161.65 | Diesel subsidized quietly to prevent price spikes post-Uganda exit. |
But for ordinary Kenyans, the price at the pump remains high. Even as global crude prices fell in late 2024, the fixed import premiums and extra costs from the extended credit were largely passed to consumers.
When diesel and petrol cargos under G2G dropped from eight shipments a month to six (as Uganda exited), the government quietly subsidized diesel to avoid sudden spikes.
In short, the “oil for dollars” deal stabilized the currency at home, but critics say it transferred the pain to the next 180 days on fuel price tags and future debt.
Parliamentary Silence and Institutional Weakness
Throughout this saga, public-sector governance has been tested. Parliament’s Public Investments Committee (PIC) interrogated the Energy Cabinet Secretary and the National Treasury on the scheme as early as mid-2023.
Senators asked tough questions. Why should foreign suppliers nominate local buyers? When will Kenya return to open tender?
The Treasury and energy ministry have largely rebuffed these inquiries, citing commercial confidentiality. Meanwhile, audit bodies have moved in.
The Auditor-General, Nancy Gathungu, flagged the G2G agreement’s “loopholes” in a March 2024 report.
Among her findings, the MoU’s exclusivity clause (Dubai courts, English law) heavily favors the UAE partner, and Kenya conceded lucrative import rights to just three companies with no oversight on the remaining fuel gap.
The AG even announced an in-depth audit of all oil imports under the G2G scheme, noting that “the lawfulness and effectiveness of the Government-to-Government oil importation scheme could not be confirmed.”
Though the National Assembly passed a supplementary budget, its clauses quietly reserve government backing for all letters of credit under the deal, effectively socializing risk without an explicit vote.
Civil society groups and media investigations (Nation, Business Daily, Al Jazeera) have exposed these irregularities, urging legal scrutiny.
In sum, the G2G deal has laid bare the tension between short-term policy goals (stabilizing FX) and Kenya’s hard-won procurement and financial rules.
Elite Capture and the Ann Njeri Saga
Politically, the fallout has sharpened narratives of elite capture. Opposition leaders argue that Ruto’s inner circle designed the deal to benefit favored businesses. The saga around Ann Njeri’s 100,000-ton consignment, widely reported and litigated, has become a symbol of that distrust.
Critics point to discrepant documents. Financiers found a Sh17.2 billion withdrawal from the exchequer on the very dates tied to Njeri’s fuel shipment and a government directive appointing the same private importer only after negotiations with the Saudis.
As one NGO report concluded, the three local importers in the G2G deal won “multi-billion shilling tenders” without competitive bidding.
Even a member of the ruling coalition privately conceded to a journalist that key MPs had been left out of the deal-making loop. In Kenya’s history of “grand bargain” politics, oil has again proven a powerful magnet.
The G2G deal’s defenders insist it was a technocratic response to an urgent crisis. But many experts say it risks locking in a costly policy even after the underlying problem has eased. As of mid-2024, the shilling had stabilized on its own, and Kenya’s foreign reserves were climbing again.
Continuing G2G shipments, they argue, simply forestalls a return to normal competitive imports while deepening Gulf leverage and private profit-taking.
A Structural Finance Breakdown
From the vantage of a global finance and energy economist, Kenya’s experiment is a textbook case of the “palliative policy.” A one-off fix with sticky, long-term side effects.
In technical terms, the G2G scheme is a contingent liability masquerading as a stabilization tool. By bypassing market competition, it created a quasi-oligopoly of importers who, at one pole, sold hard currency to the state apparatus, and at the other, liquidated fuel locally at fixed, high margins.
Over 12 to 18 months, the arrangement may have shaved a few percentage points off the exchange rate, but it did so by implanting a debt trap. Each six-month rolling credit hides a piece of deferred payment. Effectively, a currency swap with a built-in premium.
That premium flows to the suppliers (and their chosen local agents) rather than to Kenyan consumers or public coffers, distorting the fuel market. What looks like a balance-of-payments relief turns out to be a profit engine for insiders.
Kenya’s public finance must now reckon with this. The important insight is that **transparency and competition are not luxuries. They are fiscal insurance. By fusing an ostensibly sovereign deal with private profit, the government eroded those safeguards.
The G2G model, by its nature, shifts both risks and rents away from public scrutiny. If left unchecked, it could become a blueprint for similar opaque deals, whether in oil, power, or transport.
This can further entangle Kenya’s budget with international guarantors. The remedy is structural. There must be a “slow exit plan.” In practice, that means gradually unwinding credits, reviving open tenders, and embedding any future supplier credit lines within normal budgetary and legal processes.
Equally important, Parliament and the Auditor-General must enforce accountability for what was done. Full audits of the 2023-24 oil purchases, peer reviews of the new regulations, and clear rules for foreign arbitration clauses.
Only by reasserting competitive procurement can Kenya break the institutional precedent that “G2G” = non-competitive contract.