Kenya has increased the bond fee for fuel consignments destined for Uganda from $15 million to $45 million at the VTTI facility in Mombasa.
This higher bond fee is expected to impact Uganda’s direct fuel import scheme, potentially making fuel more expensive for Ugandan consumers. Both Kenya and Uganda already have the highest fuel prices in
East Africa, with Uganda relying on direct importation to mitigate costs. Currently, a litre of diesel costs $1.37 in Kampala compared to $1.33 in Kenya.
The bond serves as a security deposit to cover taxes if the fuel is sold locally instead of being transported to Uganda.
The increased bond fee at the Vitol Tank Terminal in Mombasa is likely to raise the Uganda National Oil Company’s (Unoc) costs, hindering efforts to reduce fuel prices in Uganda.
According to The East African, Uganda’s Energy and Mineral Resources Minister, Ruth Nankabirwa, stated that Kenya’s higher bond fee at the Vitol Tank Terminal International (VTTI) storage facility in Mombasa creates an obstacle to Uganda’s goal of lowering fuel prices.
Banks issuing the bonds are expected to take time to adjust to the new fees, leading to additional demurrage charges that will be passed on to consumers in Kampala.
“We expect prices to be more competitive as long as we are not pushed to incur extra costs at the port,” Nankabirwa said.
“I am going back to Kenya to meet my colleague, Mr. Davis Chirchir, because of one thing… They (Kenya) have increased the bond fee at Vitol terminal where we are offloading our products, and when you increase the bond fee by $40 million, that means you are pushing Unoc (Uganda National Oil Company) also to increase, and Ugandans are not likely to see reduced pump prices.”
The bond fee hike from $15 million to $45 million is the latest dispute between Kenya and Uganda, highlighting regional fuel trade challenges and the difficulties faced by landlocked countries in managing fuel costs.
Previous disputes between Kenya and Uganda have included delays in licensing and disagreements with Uganda’s National Oil Company (Unoc) over fuel importation strategies, which led to a legal case in the East African Court of Justice.
