Kenya’s lucrative $500 million monthly oil import deal with Gulf states has seen a shakeup, with three Kenyan banks exiting and five new ones joining the consortium handling the financing.
The deal, established in March 2023 to ease dollar shortages and stabilize the foreign exchange market, involves extending credit for petroleum imports from 30 to 180 days. Initially, five Kenyan banks were selected—NCBA, Absa, Co-operative, KCB, and Stanbic—alongside the African Export-Import Bank (Afreximbank).
However, recent disclosures by the Energy and Petroleum Regulatory Authority (Epra) reveal that NCBA, Absa, and Co-operative Banks have opted out. Equity Group, United Bank of Africa, Diamond Trust Bank, I&M Bank, and Pakistan’s MCB Bank have taken their place.
Industry sources suggest the selection wasn’t a guarantee of business. Intense competition among the four oil importers – Gulf Energy, Galana Energies, Asharami Energy, and One Petroleum – may have played a role in the exits.
“Banks simply didn’t get any letters of credit (LCs) from importers,” explained a source familiar with the situation. “Similar to an open tender system, a bank has a better chance if it’s the preferred choice of an importer.”
An LC is essentially a guarantee issued by a bank on behalf of an importer, assuring the supplier of payment. KCB Bank, which remains involved, has already facilitated $3.37 billion worth of fuel imports under the deal since its inception.
KCB Group CEO Paul Russo attributes their success to expertise in oil and gas, a strong trade finance team, and established relationships with international financial institutions.
“Three teams are crucial: oil and gas for building relationships, trade finance for structuring products, and financial institutions for securing credit lines to fulfill client commitments,” Russo explained.
While NCBA and Co-operative banks haven’t commented on their exit, the government is extending the initial nine-month scheme by another year, highlighting its importance in managing Kenya’s foreign exchange reserves. The scheme aims to ease pressure on the Kenyan shilling by postponing the immediate need for dollars to purchase fuel, the country’s largest import.
