Economist Edwin Kinyua Explains Fuel Prices Changes Under G2G Framework

Economist Edwin Kinyua has shed light on the recent changes in fuel prices in Kenya, linking them to the government’s oil import arrangement under the Government-to-Government fuel import framework (G2G).

Speaking on the issue, Kinyua explained that the G2G system was introduced to stabilize fuel supply and ease pressure on the Kenyan shilling by allowing the country to import petroleum products on credit rather than through immediate dollar payments. This, he noted, helps reduce volatility in fuel pricing, especially during periods of global market uncertainty.

According to Kinyua, fluctuations in pump prices are now influenced not only by global oil prices but also by how the G2G agreements are structured and executed. When global prices fall or remain stable, the framework allows Kenya to benefit more gradually, smoothing out sharp increases or decreases that would otherwise affect consumers directly.

He further pointed out that the system has helped address past challenges such as fuel shortages and erratic price spikes. By ensuring a more predictable supply chain, the government can better manage pricing cycles and avoid sudden shocks in the market.

However, Kinyua cautioned that the G2G framework is not a complete solution. He emphasized that exchange rate movements and additional taxes still play a significant role in determining final pump prices. A weakening shilling, for instance, can offset gains made through favorable international oil prices.

While acknowledging its limitations, Kinyua described the G2G approach as a “stabilizing tool” that provides short-term relief and predictability. He urged policymakers to complement it with broader economic measures to ensure long-term affordability of fuel for Kenyan consumers.

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By Alain Mugisho Nabalinda