Kenya Has Lost Ksh16.4 Billion Due to G-G Fuel Deal - Epra Report

Motorists have been overcharged an estimated Ksh16.4 billion or Ksh2.70 per litre of fuel since Kenya opted for government-to-government oil supply contracts with three Gulf-based companies.

In March last year, Kenya signed an agreement with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company, moving away from a monthly open tender system where local firms competed to import oil.

Consultants hired by the Energy and Petroleum Regulatory Authority(EPRA) have recommended that Kenya terminate this oil supply deal, suggesting that it is more expensive than acquiring fuel through the open tender process.

Under the previous system, all retailers in Kenya could participate, with the selected winner supplying the industry for two months and required to pay for the cargo in hard currency within five days of delivery.

“The open tender system (OTS), through monthly competition and award of supply contracts, ensures price competition between suppliers which in turn ensures supply premiums remain competitive. The OTS mechanism is therefore preferred,” said the report conducted by UK-based Channoil Consulting Ltd and Nairobi-based Kurrent Technologies Ltd.

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Fuel prices significantly impact inflation in Kenya which depends heavily on diesel for transportation, power generation, and agriculture.

Over the last year, the government has increased Value Added Tax (VAT) on fuel to 16 percent from 8.0 percent and hiked the road maintenance levy to Ksh25 in July up from Ksh18 per litre.

 A litre of diesel was selling at Ksh162 in Nairobi before the Gulf supply deal in February last year. It rose to Ksh196.47 in January before falling to Ksh171.60 this month due to  a stronger shilling, falling global prices and subsidies.

Running Public Offices Burdens Taxpayers

The National Government's operating and maintenance costs for public offices reached Ksh1 trillion for the first time in the fiscal year that concluded in June 2024.

Data from the National Treasury indicates that the government spent approximately Ksh1.05 trillion on operating and maintenance costs, which include travel, utilities, supplies of goods and services, and repairs.

The expenses have in eight years risen from Ksh471.61 billion in the year ended June 2017.

Through June 2024, the average annual increase in the cost of operating public offices was a 13.06% increase.

Upon taking office in late 2022, President Ruto made a commitment to curb the increase in operating expenses in the government.

"I have instructed the Treasury to work with ministries to find savings of Ksh300 billion in this year's budget. Next year, we will bring it further down so that, by the third year, we have a recurrent budget surplus," Ruto said in his first speech as president.

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