Tuesday, August 13, 2024 - Former Treasury Cabinet Secretary Professor Njuguna Ndung’u has touted the government’s Government-to-Government (G2G) fuel purchase arrangement as one of his success stories.
This comes despite former Energy and Petroleum CS Davis Chirchir acknowledging that the G2G oil deal with Saudi Arabia failed to reduce fuel prices and stabilize the shilling.
However, according to Ndung’u, the
deal played a pivotal role in reducing dollar demand and easing the pressure on
the Kenyan Shilling.
The good professor noted that
the G2G arrangement was strategically developed to address the
challenges posed by the global dollar shortage.
"The government created and
developed the G-to-G petroleum product purchases, which was very important,
especially coming in during the global dollar shortage period, and fuel prices
declined," Ndung'u stated.
Ndung’u emphasized that the
success of the G2G plan should not only be seen in terms of declining fuel
prices, but also in its ability to create a new market for foreign
exchange, reducing the reliance on commercial banks for dollar purchases by
oil-importing companies.
Under the G2G arrangement,
Kenya received fuel products on credit for six months, a significant
shift from the previous spot transactions that required immediate
payment.
The G2G deal involved selected
international oil companies (IoCs) supplying products to a lead oil marketing
company (OMC) in Kenya.
The OMC, supported by letters of
credit from banks, distributes the fuel to other OMCs while converting Kenya
Shillings receipts into US Dollars through an escrow account to facilitate
payments to the IoCs.
However, despite these positive
outcomes, Ndung'u noted that the G2G arrangement alone is not enough to fully
stabilize the forex market.
The Kenyan DAILY POST
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