KCB Group has injected over Sh120b to support companies importing fuel after the government discontinued the fuel subsidy programme.
In a statement, KCB Group said the move is geared toward facilitating oil importation into the country by financing oil firms under its portfolio.
According to the bank, the money will give companies a strongroom to import oil from multinational suppliers for distribution across Kenya and the wider East African region.
It noted that the oil firms must have won business under the Open Tender System (OTS) through the Ministry of Petroleum and Mining to access the Sh120b. Under the OTS system, the winning oil marketer imports fuels on behalf of other firms using confirmed allocations.
According to CEO Paul Russo, the importation of petroleum products through OTS allows marketing companies to access petroleum products at the same price and therefore levels competition in the petroleum market.
“KCB is a champion of regional trade, extending its services across the border of East Africa and beyond as a catalyst of the energy sector. We are working with the oil marketers to better support them to compete in the global petroleum market,” said Russo.
The bank went on to highlight that it is seeking to consolidate its support to the energy sector and that its contribution towards the stabilization of the prices in the short term, following the axing of the subsidies, will be vital as fuel prices are set to surge in the coming months.
Announcing the scrapping of the subsidy after his swearing-in ceremony on September 13, President William Ruto said subsidies were unsustainable and prone to abuse.
According to Ruto, the programme was a drain on public funds, and often caused artificial shortages of the very products being subsidised.
"On fuel subsidy alone, the taxpayers have spent a total of Shh144 billion, a whopping Sh60 billion in the last four months. If the subsidy continues to the end of the financial year, it will cost the taxpayer Sh280 billion, equivalent to the entire national government development budget,” said Ruto.
Adding: “In addition to being very costly, consumption subsidies interventions are prone to abuse, distort markets and create uncertainties, including artificial shortages of the very products they seek to subsidise.”
The removal of the subsidy by Ruto consequently saw a jump in pump prices with Super petrol shooting by Sh20 to retail at Sh179.30 per litre in Nairobi up from Sh159.12. Diesel, on the other hand, jumped to Sh165 from Sh140 while kerosene shot to Sh147.94 from Sh127.94.