National Oil goes missing in action amid another crippling

Kenya is sliding deeper into a fuel supply crisis, and the institution mandated to prevent such scenarios—the National Oil Corporation of Kenya (NOCK)—has become conspicuously absent from stabilisation efforts. This institutional paralysis comes at a critical moment: inflation remains sticky above the Central Bank's 5% target, transport costs are climbing, and energy-dependent sectors from agriculture to manufacturing face margin compression.

The backdrop is stark. Global crude oil prices have remained volatile, regional refinery capacity constraints persist, and Kenya's foreign exchange reserves—while improved—remain under pressure. Yet NOCK, established to act as a strategic buffer and stabiliser in fuel supply chains, has retreated to the sidelines. Industry observers point to underfunding, operational bottlenecks, and unclear government mandate as the core culprits.

## Why is NOCK absent from Kenya's fuel crisis response?

NOCK's invisibility reflects a deeper governance failure. The corporation lacks adequate capitalisation to build strategic reserves or negotiate bulk purchases at advantageous rates. Its refineries operate below capacity. Pipeline infrastructure remains fragmented. Meanwhile, private oil traders—operating on thin margins and import-dependent models—have filled the vacuum, passing price volatility directly to consumers. The government has instead relied on ad-hoc subsidy schemes and price controls, which distort markets and create artificial scarcity.

## What are the economic consequences for Kenya?

The ripple effects are already visible. Fuel pump prices have surged 15-18% year-on-year in urban markets. Matatu (minibus) operators have raised fares, compressing consumer spending on other goods. Manufacturers are rerouting production to neighbouring countries with more stable energy costs. Agricultural transport costs are eating into farm-gate prices for smallholders. Tourism operators—already battling post-pandemic recovery—face margin pressure from fuel surcharges. For foreign investors, the signal is troubling: Kenya cannot reliably manage a critical input.

The inflation angle is particularly concerning. Transport costs feed into food prices, manufacturing costs, and logistics. With NOCK absent, there is no institutional actor capable of deploying counter-cyclical policy—buying when prices dip, releasing reserves when prices spike. This pro-cyclicality amplifies volatility and makes inflation forecasting harder for the Central Bank of Kenya.

## How can Kenya stabilise fuel supply long-term?

Three interventions stand out. First, recapitalise and operationalise NOCK with a clear strategic mandate: build a 60-day strategic reserve, negotiate regional pipeline access, and coordinate refinery maintenance schedules to avoid simultaneous shutdowns. Second, accelerate the Nairobi Oil Refinery rehabilitation—completion would unlock 60,000 barrels per day of domestic processing capacity, reducing import dependency by 25%. Third, establish a fuel price stabilisation fund (indexed to crude, not fixed) to smooth volatility without creating artificial scarcity.

The window for preventive action is narrowing. Kenya's 2025 budget already absorbs fuel-related pressures. A prolonged crisis could force CBK to hold rates higher for longer, crowding out productive investment. NOCK's re-activation—not as a subsidy vehicle, but as a strategic reserve manager and supply coordinator—is overdue.

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