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Kenya’s plan to have the government take over all imports of petroleum products from private companies has been challenged in court, with several petitioners seeking a ruling that the nationalization of the oil imports is unconstitutional.
Kenya decided to go with the plan to have all oil imports nationalized after a severe foreign exchange reserves crunch left the African country with just four months worth of foreign currency to cover imports.
So the government and the energy ministry are seeking to take over all imports and pay for the supplies after at least six months, compared to payments due within a week per the current imports scheme.
However, four petitioners have filed an objection to the plan in court, Bloomberg reported on Thursday, citing a filing made by Ndegwa & Ndegwa Advocates on behalf of the petitioners.
The nationalization of oil imports “amounts to unfair practice as an unconscionable representation that is excessively one sided” and favors the supplier rather than the consumer, the court documents say.
The Kenyan government should have thought of better ways to stabilize the bleeding of U.S. dollars instead of kicking private oil marketing firms out of business, according to the filing carried by Bloomberg.
Earlier this week, Kenya issued the first tender for oil imports under the new plan, with 180 days between product delivery and payment settlement.
Kenya is now seeking government-to-government contracts to procure oil products following the crash of the Kenyan currency and the acute shortage of foreign exchange reserves.
The winner in this first tender will supply oil to Kenya for nine months and will be paid every six months, Daniel Kiptoo, director general of energy industry regulator EPRA told Reuters.
“By doing that we alleviate the pressure by removing a third of the demand for dollars in the market,” Kiptoo added.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com