Tuesday, February 27, 2024
HomeBusinessAmid a shortage of...

Amid a shortage of forex, Vivo Energy Kenya has decided to take out dollar loans as a safeguard

Vivo Energy Kenya, an oil marketer, faced difficulties in accessing hard currency due to liquidity constraints and a weakening exchange rate, which hindered the fulfillment of external orders.

As a result, the company resorted to borrowing in US dollars to mitigate forex shortages. Amid a shortage of forex, Vivo Energy Kenya has decided to take out dollar loans as a safeguard. the parent company, reported in its 2022 annual report that the borrowings, including a $603 million bridge loan and additional bank debt of $233 million, were partially drawn from a bridge loan facility and short-term bank debt.

The report, however, did not specify the exact portion of the total outstanding borrowings of $1.53 billion that were attributable to the Kenyan unit, nor did it indicate the extent of the currency swap arrangement applied to the Kenya loans.

Vivo Energy Kenya’s borrowings were necessitated by the country’s liquidity constraints, which compelled it to seek foreign exchange borrowings and swaps to remain operational.

The company cited the need to fund working capital requirements as one of the factors driving its increased borrowing, which was partly attributable to the proceeds from the bridge loan and the short-term financing.

Vivo Energy also disclosed that it used cross-currency swaps to mitigate the impact of future depreciation of the local currency against the US dollar, which would have raised its finance costs on dollar-denominated debt.

The oil marketer, which holds the largest retail market share in Kenya at 22.79%, is among the largest buyers of dollars in the country, given the high monthly payments the country makes for oil imports.

These imports account for almost a third of Kenya’s total monthly import bill, contributing to the scarcity of dollars in the economy. The depreciation of the Kenyan shilling has further exacerbated the situation, with the official exchange rate published by the Central Bank of Kenya at an all-time low of 130.10 units to the dollar.

Retail buyers in banking halls pay even more, up to Sh144 per dollar, and large buyers face daily purchase limits.

To address the dollar shortage, the Kenyan government has secured a credit deal with Saudi and UAE governments to extend the time required to source dollars for fuel payments from five days to 180 days.

Follow us on Twitter. Send us a secure tip

- A word from our sponsors -

Most Popular

More from Author

Microsoft’s Strategic Acquisition of OpenAI’s Sam Altman Sends Stocks Soaring to Record High

Microsoft, a leading tech giant, has propelled its stocks to unprecedented...

Dating Services Industry to Hit 600 Million Users, $8B in Revenue Next Year

The dating services industry has seen impressive growth over the past...

Citi Launches Securities Lending Access™ In Sweden

LONDON – Citi Securities Services announced Nordnet AB (Nordnet), the leading...

- A word from our sponsors -

Bridging Cultures, Building Futures: The Kiige and Emmanuel Initiative for Immigrant Empowerment in Canada

In the heart of Canada's multicultural landscape, Duncan Kiige and Emmanuel, both celebrated public speakers with immigrant backgrounds, have become symbols of hope and transformation for new immigrants. Their recent conference on career and personal development marked a significant milestone in their mission to empower newcomers with...

UGANDAN FIRST LADY AMAZED BY HAMZ NAKIVUBO STADIUM DEVELOPMENT WORKS BY HAMIS KIGGUNDU.

The NRM government is very proud to see the example of our young people begin to build Uganda by putting up projects such as this one. We congratulate Ham Kiggundu for this excellent jobKAMPALA UGANDA| As sports lovers countdown to 2027 when the Nakivubo-based Hamz Stadium will...

Raila’s search for a post with the AU Commission could be a suitable trapdoor or departure.

In Kenyan politics, Raila Odinga has long been a mystery. His international performance? Even when the African Union designated him, he remained debatable.But he said on Thursday that he would run for the position of Chairperson of the African Union Commission. One diplomat tampered with his first...

Court Finds Jowie Irungu Guilty of Monica Kimani’s Murder

In a landmark ruling, Justice Grace Nzioka declared Jowie Irungu guilty of the murder of Monica Kimani. According to Justice Nzioka, the evidence presented convincingly establishes Jowie's culpability in the crime beyond a reasonable doubt.Highlighting the sequence of events, Justice Nzioka outlined how Jowie, armed with a...

KUPPET Questions Government Directive For Parents To Pay Schools Fees E-Citizen Platform

KUPPET opposes the Government directive for parents to use eCitizen platform to pay school fees calls for clear public participation, legislation and policy framework.KUPPET national officials have opposed the move by Government to force parents to use eCitizen platform to pay school fees saying it will be difficult for...

List of best Audiology Services in Nairobi, Kenya

List of best Audiology Services in Nairobi, Kenya. The word audiology is made up of two roots: Audio and Logy. ‘Audio’ refers to ‘hear’ and ‘logy’ to ‘the study of’. In essence, audiology is the study of hearing - as the inner ear is also required...