NAIROBI, Kenya- In a fresh twist to East Africa’s fuel saga, Kenya has ramped up the bond fee for Uganda’s direct fuel imports, doubling it to a staggering $45 million (Sh5.78 billion).
This unexpected move complicates Uganda’s plans to lower pump prices and poses new challenges in the region’s fuel dynamics.
Uganda’s Energy and Mineral Resources Minister, Ruth Nankabirwa, disclosed that Kenya’s hike in the bond fee at the Vitol Tank Terminal International (VTTI) storage facility in Mombasa—from $15 million (Sh1.92 billion) to $45 million—has created a significant bottleneck.
This facility is critical as it connects to the Kenya Pipeline Company pipeline network, serving Uganda and other landlocked countries.
A bond fee serves as a guarantee, ensuring that duties and taxes are paid in case the fuel is disposed of locally.
This fee increase, driven by the Kenyan Ministry of Energy’s directive to the Kenya Revenue Authority (KRA), is expected to be a cost passed on to Ugandan consumers.
The increased bond fee is poised to impact fuel prices in Uganda. Minister Nankabirwa voiced concerns over the added financial burden, stating, “When you increase the bond fee by $40 million, it means Uganda National Oil Company (Unoc) has to raise more funds, which Ugandans will feel at the pump.”
Banks issuing these bonds will need time to adjust to the new amounts, likely leading to higher demurrage charges as cargo waits clearance.
These additional costs will trickle down to consumers in Kampala, potentially stalling efforts to reduce fuel prices.
This bond fee hike is the latest in a series of fuel-related disputes between Kenya and Uganda.
Last year, delays in issuing Unoc a license led to Uganda taking Kenya to the East African Court of Justice.
While Unoc eventually received its license in March, these setbacks have continually strained the relationship between the two countries.
Uganda has been striving to reduce reliance on Kenyan oil companies, recently signing a five-year deal with Vitol Bahrain to facilitate direct fuel imports.
This move followed Kenya’s agreement with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company for a fuel supply on credit, aimed at stabilizing the Kenyan shilling.
