Uganda’s fuel prices may remain high despite new importation plan

Uganda’s Energy Minister, Ruth Nankabirwa, has warned that the recent increase in bond fees by the Kenyan government may negate the benefits of the country’s new fuel importation plan.

“We expect the prices to be manageable, to be more competitive, but when you increase the bond fee to the tune of $40 million, then that means that you are pushing UNOC to also increase, and therefore, Ugandans are likely not to see a reduced pump price,” she said.

The Kenyan government has increased the bond fee from $0 to $40 million, which will be passed on to Ugandan consumers.

“This is a deterrent, and this is not how the East African Community spirit should operate,” Nankabirwa added.

Private oil importers have also expressed concern over the increase in bond fees, stating that it may lead to higher fuel prices.

“The tax will force UNOC to automatically increase the pricing in order to make profits. The money we have been losing to middlemen, which the government is trying to save, will now go to the Kenyan government,” said Anthony Ogalo, Chairman of the Sustainable Energies and Petroleum Association (SEPA).

The Ugandan government had hoped to reduce fuel prices by importing fuel directly from the Middle East, bypassing Kenyan middlemen. However, the increase in bond fees may negate this benefit. “The only thing we need is Kenya dropping this fee because they have no basis for levying it, it has never been there, and I don’t see why they are bringing it now,” Ogalo added.

The Energy Minister is set to meet with her Kenyan counterpart to negotiate a reduction in the bond fee. If negotiations fail, Uganda may be forced to pay the bond fee, which will be passed on to consumers, or reroute its fuel imports through Tanzania, which is a longer and more costly route.