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'Strengthening Our Own Child': Ugandan MPs Approve Bill Giving Govt Oil Import Monopoly

© AFP 2023 PIUS UTOMI EKPEIA general view of Dangote Petroleum Refinery Petrochemicals in Lagos
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Prior to the bill, Uganda's importation of petroleum products was handled independently by the country's licensed petroleum marketing companies through structures in Kenya and Tanzania. According to the government, Uganda imports 90% of its petroleum products through Kenya and 10% through Tanzania.
The Ugandan Parliament passed the Petroleum Supply Bill 2023 giving the state-run Uganda National Oil Company (UNOC) the exclusive right to import and supply all petroleum products destined for the Ugandan market, the website of the parliament said.
The bill, which has yet to be approved by President Yoweri Museveni, is intended to eliminate middlemen in the oil supply chain, which are said to be the cause of fluctuations in oil pump prices, according to the statement.
The Committee on Environment and Natural Resources reasoned that Uganda has to go through three layers of intermediaries from foreign refineries to Ugandan oil marketing companies to get oil, resulting in higher final pump prices.
In particular, the committee lambasted Kenyan intermediaries who "adversely disadvantaged Ugandans in access to petroleum products timely and in the required quantities."
"The committee observed that Uganda’s current inability to purchase oil directly from the refineries, leads to an extra markup on Uganda's fuel from Kenyan companies and insecurity in supply of petroleum products which contributes to high and unpredictable pump price," the parliament statement read.
Most parliamentarians supported a UNOC monopoly, emphasizing the impracticality of intermediaries in oil imports.
"Giving UNOC a monopoly is like strengthening our own child, it is for our own good that we get rid of middlemen who take the big portion of the profit," said Stephen Baka representing Bukooli North County in Bugiri District of Uganda.
However, some lawmakers opposed the bill, saying that the creation of monopolies has not benefited the economy, citing the example of monopolistic state-owned enterprises in the distribution of electricity, cement and iron ore.
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The MPs also criticized UNOC for signing an agreement with the Nederlands-based oil company Vitol to act on its behalf to purchase oil from international refineries.
"It would have been better that we give UNOC money to trade directly. When we bring in Vitol the shareholder of Vivo energy that trades as Shell, I can tell you we might be helping them to make more money instead of benefiting Ugandans," Nandala-Mafabi, MP from the Budadiri County West, said.
According to the committee's findings, the agreement is based on the fact that UNOC does not currently have the financial capacity to purchase petroleum products directly from refineries.
Also, as part of the development of the energy sector, Uganda last week signed an agreement with Tanzania to build a pipeline that will transport natural gas from the southern regions of Tanzania to Uganda.