Kenya has issued its first oil import tender under a new system designed to cut pressure on the foreign exchange rate by switching to 180-day credit from settlement on delivery, the head of its energy regulator said on Tuesday.
President William Ruto’s government opted for government-to-government oil supply contracts, after the East African nation’s shilling currency tumbled through a series of record lows since last year.
“The bids opened yesterday and the government is in the course of reviewing them,” said Daniel Kiptoo, the director general of energy industry regulator, EPRA.
The winner will supply products for nine months, he said, and will be paid every six months.
“By doing that we alleviate the pressure by removing a third of the demand for dollars in the market,” Kiptoo said.
The previous system was open to all retailers in Kenya, with the winner supplying the industry’s requirements for two months and paying for the cargo in hard currency within five days of delivery.
Useable foreign exchange reserves shrank to less than enough to cover four months of imports of all kinds, which is a statutory requirement.