Former Treasury CS NJUGUNA NDUNG’U hails G2G oil deal with Saudi as one of his success stories even after it failed to reduce fuel prices

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