The government now says the country is yet to feel the impact of the government-to-government petroleum products deal in the foreign exchange market because marketers are still clearing old dollar-priced stocks that are held within the oil pipeline.
This product, known as line fill, refers to petroleum product that stays on the pipeline at all times.
Players licensed to import fuel into the country are required to maintain a million litres of product in the line at all times.
The maiden shipment of the government-to-government deal docked at the port of Mombasa on April 13 with 165,000 metric tonnes of fuel.
“The first cargo that has arrived on the government-to-government deal and should be off-taken on the shilling is yet to hit the market because of the line fill,” said Energy and Petroleum Cabinet Secretary Davis Chirchir at a meeting convened by the Petroleum Institute of East Africa in Nairobi.
“I do want to believe that in the next five or six days the government-to-government product will hit the market.”
The credit-based deal with Saudi Aramco and the Abu Dhabi National Oil Company (Adnoc) was made public on March 13 and is meant to run until mid-September.
The import agreement was put in place to address a crisis in the foreign exchange market given that oil shipments account for 28 percent of Kenya’s monthly imports, which equals up to $500 million per month.
High demand for dollars by oil marketers at a time of reduced supply was one of the drivers of the shilling’s sharp depreciation in the forex market, leading to fears of the emergence of a parallel exchange rate.
Data from the Central Bank of Kenya shows the shilling has depreciated by 9.91 percent this year, with commercial banks selling the dollar as high as 144 against the Central Bank’s mean rate of 135.67, pointing at a wide spread in the market.
The Ministry of Energy says this spread should reduce further once oil marketing companies begin off-taking products priced in the shilling within the next week.
