President Ruto eyes billions in Saudi Arabia carbon credit deals

President William Ruto has invited Saudi Arabia to pump billions of dollars into the Kenyan economy in the next three years by purchasing government securities.

A source accompanying Dr Ruto to Riyadh, Saudi’s capital for the ongoing Future Investment Initiative, told the Business Daily that Kenya is also eyeing a piece of the Gulf state’s petrol dollars in exchange for carbon credits.

We could not independently verify what kind of government securities—which include short-term Treasury bills and long-term Treasury bonds—will be on offer.

Read: Saudi Arabia posts fastest growth in Kenya diaspora inflows

Generally, foreign participation in existing government securities has been low.

“Ideally, Saudi is to bring some cash to stabilise the economy,” said the source.

State House did not respond to our request for comments on this story.

More than 6,000 delegates have registered for the three-day Future Investment Initiative in Riyadh, the capital of the oil-rich kingdom dubbed “Davos in the Desert.”

Saudi Arabia is increasingly turning into a vital player in Kenya’s nascent voluntary carbon market.

At last year’s Future Investment Initiative forum, 1.4 million tons of carbon offsets were auctioned, with Saudi Aramco, the world’s largest oil producer and also a participant in the import credit scheme, being the lead buyer.

Carbon offsets—to be differentiated from carbon credits—are created when companies or individuals finance projects that reduce greenhouse gas emissions elsewhere.

Kenya earlier received $13.79 million (Sh2.07 billion) from 16 Saudi firms, including Aramco and Saudi Electricity Company, in an auction that was organised by Saudi Arabia’s Regional Voluntary Carbon Market Company (RVCMC).

“A portion of the proceeds from these credits has been invested toward funding clean cooking and solar home systems. The dividends of the emerging circularity exemplify the vision of the global conservation movement,” said Dr Ruto during the launch of the African Carbon Market Initiative at COP27 last year.

Carbon credits allow companies to emit a specific amount of carbon dioxide or other harmful gases — with one credit the equivalent of 1.0 ton of emissions. They are known to be generated through projects such as tree planting or using cleaner cooking fuel.

While proponents of carbon credit argue that firms can use carbon credit to achieve carbon-neutral status, critics see it as giving oil producers a licence to pollute.

The Gulf state has in recent years emerged as a critical source for such products as refined petroleum and chemical fertilisers but also a labour market for tens of thousands of jobless Kenyans.

Most of the Kenyan migrants in Saudi Arabia have found opportunities in low-cadre domestic work despite rising complaints of mistreatment.

The Ruto administration is targeting half a million job opportunities for Kenyans in Saudi Arabia.

Saudi Arabia is also a key source of diaspora remittances, with data from the Central Bank of Kenya (CBK) showing that Kenyans living and working in the Gulf state leapfrogged those in the United States to become the biggest drivers of growth in cash wired back home in the first eight months of the year.

Towards the end of last year Saudi Aramco got the nod from the competition watchdog to enter the Kenyan market through the acquisition of US motor oil and lubricants group Valvoline which has a presence locally.

The Competition Authority of Kenya gave Aramco Overseas Company, the investment arm of Saudi Aramco, the nod to acquire the Kenyan operations of VGP Holdings as part of the global deal worth $2.65 billion.

Read: Saudi Arabia overtakes China as Kenya’s top import market

The acquisition looks set to trigger shifts in Kenya’s fuel lubricants market which is currently dominated by multinational firms such as Vivo, the seller of Shell products, Total Energies and Rubis.

Dr Ruto’s trip to Saudi Arabia comes a month after Kenya paid its first instalment to Gulf state firms under a government-to-government import credit scheme, aimed at addressing the exchange rate volatility.

Treasury Cabinet Secretary Njuguna Ndung’u said that Kenya had already paid $238,842,710.12 (Sh35.3 billion) to Gulf companies – Aramco, United Arab Emirates’ Abu Dhabi National Oil Company and Emirates National Oil Company.

→ (email protected)