A pump attendant fills a fuel pump in Kampala. . PHOTO/Abubaker Lubowa
Uganda’s fuel prices have been steadily increasing over the past three months and counting, defeating the promise of lower prices after Kenya-based middlemen, who used to import fuel for Uganda were dumped and replaced by the state-owned Uganda National Oil Company (Unoc). Unoc assumed the role of the sole importer of petroleum products for the Ugandan market in July 2024, with the hopes that since the aforesaid middlemen, who were charging the country extra money were out, the fuel prices would naturally fall.
Misery suffered at the pump would consequently reduce. Substantially. Things have not quite worked out that way, though. A mini survey carried out by the Monitor in the Uganda capital of Kampala shows that petrol pump prices averaged Shs5,000 per litre at most of the Total Energies and Vivo (Shell) stations. This is up from Shs4,700 in December of 2024. All of which begs the question, what is going on? Amid pointers of global crude oil prices racing towards $50 per barrel and a 23.27 percent year-on-drop, many Ugandans were desperately hopeful that this state of affairs would reflect at the pump as they pulled into forecourts of different major oil suppliers. What has, however, panned out is the very embodiment of a damper. Why, though?
Can taxes be blamed for putting a damper on those that use petroleum products either directly or indirectly?
In a word, yes. Industry player Anthony Ogalo, the general manager of the Sustainable Energies and Petroleum Association of Uganda (Sepa), an umbrella organisation for oil marketing companies, says there is no way prices can come down when oil marketers are operating in a high tax business environment where every budget cycle the government is increasing taxes. “Taxes have a rippling effect on the entire industry value chain, with the final consumer bearing the heaviest burden,” Ogalo tells the Monitor. Ibrahim Ssemujju Nganda, Uganda’s shadow Finance minister, sees no end in sight. The Government of Uganda (GoU), he adds, will not stop targeting the “easy-to-collect” taxes. This, unfortunately, is not good news for people who use petroleum products either directly or indirectly. “If you look at their tax proposals, when they want to raise money, they are ever increasing taxes on beverages, petroleum products, and cigarettes,” Ssemujju notes in an interview. Indeed, in the Fiscal Year (FY) 2024/2025, before Unoc started importing fuel directly from the Middle East, the GoU imposed an additional Shs100 excise duty on both diesel and petrol.
In the FY 2025/2026, the GoU again proposed to amend the excise duty tax to allow an increase of the tax rate on diesel and petrol from Shs1,550 to Shs1,650 and diesel from Shs1,230 to Shs1,380 per litre, respectively. This is amid concerns that policy makers at Uganda’s finance ministry are negating policies aimed at keeping fuel prices in the country low. The House Committee on Finance is currently poring over the tax amendments that include bringing in new duties on the aforesaid petroleum products. Mr Ssemujju, who sits on the parliamentary committee, has an air of resignation while speaking to the proposed duties on fuel imports. Uthman Ssempijja, a tax expert, reasons that the GoU has to find new revenue streams as the national budget continues to grow even as donor funding becomes increasingly unreliable. The drop in donor funds, Mr Ssempijja adds, partly explains why tax on fuel keeps being targeted. Fuel tax is an attractive option as it is difficult for consumers to avoid. “Nobody can avoid consuming fuel, either directly or indirectly,” Ssempijja tells the Monitor. As a result, the GoU is likely to continue relying on fuel tax as a key revenue source.
Did Uganda sign a bad deal with Vitol? Uganda’s dalliance with Vitol Bahrain, which wholly owns the oil marketing company (OMC) giant Vivo Energy in the market, is a recipe for an abusive dominant position. These are the concerns of regional watchdog Comesa Competition Commission (CCC), which polices antitrust business practices in the bloc. The Common Market for Eastern and Southern Africa, or Comesa sets out to promote regional integration, with the bloc’s expansive physical range spanning from Tunisia to Eswatini. Uganda is amongst the 21 African member states whose total population includes 600 million people. “Vitol operates in the downstream market through Vivo Energy. To ensure that Vivo Energy is not given unfair advantage over other OMCs, there is a need to ensure that it acquires the petroleum products from Unoc at the same terms and conditions as other OMCs,” says Dr Willard Mwemba, chief executive of the Lilongwe-based CCC. The East African quotes him proffering that in a situation where Uganda lacks an independent national competition authority, the Vitol-Vivo relationship calls for scrutiny to ensure the local subsidiary does not gain an unfair advantage in Uganda’s downstream energy sector.
What is the position of Uganda’s Finance Ministry?
Henry Musasizi, the junior finance minister in charge of general duties, this month told members of the House Committee on Finance that the GoU has dropped the plan of increasing the excise duty on fuel. The minister, however, was economical with information on the same, prompting economists to speculate that the tax will be brought again. “The minister did not give reasons for withdrawing the proposed increase on duties of fuel,” Mr Ssemujju tells the Monitor.
With the coming elections and the country contending with unending power blackouts after the GoU, through Uganda Electricity Distribution Company, took over from Umeme, the Kira Municipality lawmaker suspects that state actors and policy wonks knew the increment was unpopular, forcing a walk back. “Even last year, they brought an increment, but one on kerosene was abandoned; they had proposed to introduce a tax on hoes, but they abandoned it. On popular things, they are fearful,” Mr Ssemujju says.
What about the geopolitical changes?
It is a handy weapon of the technocrats at Uganda’s Finance ministry and is cited in the vast bulk of their reports. This time around, the technocrats say the decision to shelve the plan to increase fuel duty was largely informed by the increasing disruptions in global trade. Experts at the International Monetary Fund (IMF) confirm the heightened global uncertainty, especially with major policy shifts underway, citing specifically the series of recent tariff announcements by the United States and countermeasures by other countries. “Tariffs have increased financial market volatility, weakened growth prospects, and increased risks,” according to the IMF portal, which names rising debt levels in many countries and already strained public finances, which in many cases will also need to accommodate new and permanent increases in spending, such as defence as the risks.
“Rising yields in major economies and widening spreads in emerging markets further complicate the fiscal landscape.” For instance, the United States’ move to use tariff measures as a protectionist tool of its market has sparked a tariff war with China, which has ripple effects across global markets. Moses Kagwa, the acting director of economic affairs at the Ministry of Finance, says: “There are disruptions in the world trade order. We do not know what will happen in the next two months, so we do not want to impose tax on fuel, which is a very important component at this time.”
Finding new revenue streams
Nobody can avoid consuming fuel, either directly or indirectly– Mr Uthman Ssempijja, tax expert.
Did we sign a bad deal?
Uganda’s dalliance with Vitol Bahrain, which owns the oil marketing company giant Vivo Energy in the market, is a recipe for an abusive dominant position.
These are the concerns of regional watchdog Comesa Competition Commission, which polices antitrust business practices in the bloc. The Common Market for Eastern and Southern Africa, or Comesa, sets out to promote regional integration, with the bloc’s expansive physical range spanning from Tunisia to Eswatini.
Uganda is among the 21 African member states whose total population includes 600 million people.
