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Kenya’s G2G Oil Program Faces Political Scrutiny Amid Global Price Shocks
Kenya’s government has defended its Government-to-Government (G2G) oil procurement program amid criticism from opposition parties following recent fuel price increases that have strained household budgets nationwide.
The G2G initiative, established in 2022 when the current administration took office, was implemented during a period of acute fuel shortages, price volatility, and dwindling foreign exchange reserves. Prior to the program, Kenya relied heavily on spot buying, which created artificial shortages and destabilized the country’s dollar reserves.
Under the G2G arrangement, Kenya established direct relationships with major oil producers including Saudi Aramco, ADNOC, and ENOC, eliminating intermediaries from the supply chain. The program schedules oil imports every two months with pre-negotiated prices, creating predictability for consumers and economic planners alike.
Government officials point to several key achievements of the program, including stabilization of the Kenyan shilling, which now ranks among the five strongest currencies globally. Inflation has dropped significantly from 9.6% in 2022 to a current rate of 5.3%, with foreign currency reserves now covering over 6.3 months of imports.
The Energy & Petroleum Regulatory Agency (EPRA), which reviews oil prices monthly on the 14th, has maintained that recent price increases stem from geopolitical factors rather than flaws in the procurement system. Officials cite the US-Israel strikes on Iran in February 2026 as a critical turning point, disrupting shipping through the Strait of Hormuz—a vital chokepoint that handles approximately 20% of global oil supply.
Between February and March 2026, landed costs for petroleum products spiked dramatically, with diesel increasing by 68.72% (from $636 to $1,073 per cubic meter) and kerosene more than doubling. Super petrol costs rose by 41.53% during the same period.
In response to these external pressures, the government has implemented several measures to cushion consumers. VAT on petroleum products has been reduced from 16% to 8% through a Special Gazette Notice effective April 16. Additionally, KSh 6.2 billion has been allocated from the Petroleum Development Levy Fund to stabilize pump prices.
For kerosene specifically, the government is subsidizing KSh 108 per liter to protect low-income households that rely on the fuel for cooking and lighting. Officials claim that without these interventions, petrol prices would have risen by KSh 37 and diesel by KSh 70 in the current pricing cycle.
The opposition has focused criticism on a controversial shipment, the MV Paloma cargo, alleging irregularities in pricing. Government representatives counter that this particular shipment has been excluded from pricing calculations and that the G2G agreement has secured significantly lower prices overall—as low as $140,111 per metric ton compared to $198,855 for the outlier cargo.
Market analysts note that the extended 180-day credit terms offered by Gulf nations under the G2G program represent a significant vote of confidence in Kenya’s economic management. This arrangement has helped maintain supply stability during a period of intense global market volatility.
The government has rejected opposition calls to dismantle the Road Maintenance Fuel Levy, stating that these funds have been leveraged to secure KSh 175 billion for infrastructure development, unlocking over 6,000 kilometers of road projects across the country.
Looking forward, authorities are working to rebuild strategic fuel reserves, which currently stand at just 16 days for petrol, to provide better protection against future market disruptions. Officials have cautioned that calls for public protests could exacerbate the situation by disrupting supply chains and potentially creating artificial scarcity.
The fuel price situation remains fluid, with the next EPRA review expected on May 14, which will reveal whether recent global market trends will provide relief to Kenyan consumers.
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11 Comments
The G2G approach appears aimed at shielding Kenyan consumers from global price swings and supply disruptions. Establishing direct relationships with producers is an innovative solution, though the details around negotiated pricing and supply commitments will be key.
Stabilizing the Kenyan shilling is a significant achievement, though the broader economic impacts, including on inflation, will be important to track over time. Curious to see if other African nations consider similar direct sourcing models.
Reducing reliance on spot markets and intermediaries in the fuel supply chain seems like a prudent strategy to provide more stability for Kenyan consumers. The reported achievements in currency and inflation management are noteworthy, though the broader economic impacts will be important to monitor over time.
Curious to see if this G2G model could be applied to other key commodities or resources beyond just fuel, to help insulate developing economies from global price shocks and supply chain disruptions.
The direct government-to-government fuel procurement model is an innovative approach to address supply chain issues and price volatility. However, the political scrutiny suggests there may be some complexities or tradeoffs that need further investigation and public disclosure.
While the G2G initiative aims to address fuel shortages and price volatility, the political opposition raises questions about the program’s transparency and long-term sustainability. It will be important to see independent analysis of the program’s impacts on consumers, the economy, and Kenya’s relationships with global energy suppliers.
Stabilizing the local currency is a notable achievement, but the broader macroeconomic effects, including on inflation, warrant close examination. Curious to see if this model is replicated in other developing economies facing similar energy supply challenges.
While the G2G program appears aimed at stabilizing fuel supplies and prices, the political opposition suggests there may be more complexity to the initiative than is being publicly disclosed. Transparency around the negotiated terms, impacts, and potential tradeoffs will be important for building public trust.
This program seems like a pragmatic response to the fuel supply and pricing challenges Kenya has faced. Reducing reliance on spot markets and intermediaries could provide more stability, though the political scrutiny suggests there may be some tradeoffs or unintended consequences to monitor.
Interesting to see Kenya taking steps to stabilize fuel supplies and prices. Managing energy imports directly with major producers seems like a prudent move to reduce volatility and strengthen the currency. Curious to learn more about the specific mechanics and results of the G2G program.
It will be important to monitor the long-term impacts and sustainability of this new procurement strategy. Reducing reliance on spot markets could provide more predictability, but may also come with other tradeoffs.