Kenyans took to social media to raise concerns over the continued depreciation of Kenya shilling against the US dollar despite the government-to-government (G2G) oil deal signed between Kenya and the Kingdom of Saudi Arabia.
In March, Energy Cabinet Secretary Davis Chirchir announced the deal that would see Kenya receive oil at low prices from the Middle East.
While at the Nairobi Securities Exchange on April 11, President stated: "In fact in the next one month or so you will see the dollar exchange rate coming down in a very phenomenal way. In fact in my estimation, in the next couple of months, the exchange rate will come below Ksh.120, maybe Ksh.115."
However, nothing appears to have changed:
Kenyans.co.ke spoke to Vincent Kimosop, a policy and governance expert and CEO at Sovereign Insight who gave three reasons why the oil deal did not salvage the value of the Kenya shilling.
“We still are importing more, particularly, using dollars in the areas that we are sourcing.
“Kenya is importing high-value goods for consumption,” stated Kimosop.
This increases demand for the dollar because businesses want to pay foreign firms when they import.
According to the Kenya National Bureau of Statistics (KNBS) Economic Survey 2023, Kenya imported Ksh923 billion worth of non-food industrial supplies and Ksh647 billion worth of fuel and lubricants in 2022.
“The performance of our exports matters,” he stated.
This means Kenya is buying more and selling less, thus, having reduced dollar inflows.
According to the KNBS Economic Survey 2023, Kenya's top two exports were tea and horticultural products.
Tea brought in Ksh163 billion whereas horticulture Ksh152 billion.
Policy Time Lag
“There is also the issue of time lags in terms of policy making which affects the G2G policy,” he stated.
Deputy President Rigathi Gachagua while in Mombasa received the first shipment of oil from the Middle East.
On April 27, Energy Cabinet Secretary (CS) Davis Chirchir noted that Kenya was yet to use the oil from the Middle East because there was still existing stock in the market.
For dollar availability, Kenya relies heavily on remittances from Kenyans living abroad.
KNBS noted that remittance inflows rose by 15.8 per cent to KSh 478.5 billion from 2021 to 2022.
According to data from the Central Bank of Kenya (CBK) released in January 2023, diaspora remittances increased by 8.34 per cent to Ksh552 billion in 2022.
The top three countries for remittances are the United States (US), the United Kingdom (UK), and the Kingdom of Saudi Arabia (KSA).
The US accounts for Ksh275 billion, the UK Ksh39 billion, and Saudi Arabia Ksh35 billion. The US accounts for 58 per cent of Kenya’s remittances.
The price of oil is determined by global supply and determined. Popular oil benchmarks include West Texas Intermediate (WTI) and Brent Crude.
On May 14, the Energy and Petroleum Regulatory Authority (EPRA) announced that oil prices in Nairobi were Ksh182.70 for petrol, Ksh168.40 for diesel, and Ksh161.13 for kerosene.
On Wednesday, May 17, the Kenya shilling traded between Ksh137 and Ksh141 to the US dollar.