• Uganda seeks parliamentary approval for $2 billion Vitol-backed UNOC loan

• Funds target oil infrastructure projects and national road development

• Loan secured by future oil revenues via escrow accounts

Uganda’s State Minister for Finance, Henry Musasizi, on Tuesday, Dec. 16, asked parliament to authorize the state-owned Uganda National Oil Company (UNOC) to take out a $2 billion loan from Vitol Bahrain E.C. The financing would be allocated between UNOC’s oil-sector projects, which would receive $1.2 billion, and national road infrastructure, which would take the balance. The government says the arrangement would speed up projects delayed by budget constraints and generate significant medium-term revenue.

The loan would have a tenor of 84 months, including a two-year grace period during which interest would accrue but no principal would be repaid. UNOC would be the borrower, with debt service backed by state capital injections into the company. As collateral, the government plans to route future oil revenues through dedicated escrow accounts to ensure repayment in the event of default.

Funds earmarked for UNOC would finance key logistical assets, including the Kampala storage terminal, the expansion of the Jinja terminal, and the acquisition of storage capacity at the port of Mombasa. They would also cover the extension of the finished-products pipeline between Eldoret and Kampala, as well as the first year of construction of Uganda’s refinery. The plan further includes the acquisition of equity stakes in Kenya Pipeline Company, the state-owned operator of petroleum transport infrastructure in Kenya and the wider region.

From the government’s perspective, the strategy responds to two constraints. Traditional sources of infrastructure financing—particularly concessional loans and international bond markets—have become both costlier and more selective. At the same time, the global energy transition and growing environmental scrutiny have dampened investor appetite for African oil projects, as illustrated by the difficulties in securing financing for the EACOP pipeline.

Against this backdrop, Kampala is turning to commercial partners already embedded in the domestic petroleum ecosystem. Since July 2024, Vitol has been Uganda’s sole supplier of petroleum products under a supply agreement with UNOC. The finance ministry says the arrangement has stabilized supply and prices while generating fiscal revenue. Once operational, the government estimates UNOC could generate up to $5.6 billion in cumulative revenue, easing pressure on the consolidated fund. The stated aim is to move the company from reliance on budget support toward a model in which it finances growth from its own cash flows.

However, while the structure allows the government to bypass immediate budget constraints, it shifts a substantial share of risk onto future oil revenues. International experience shows that resource-backed financing can prove fragile when assumptions on production, prices, or project timelines fail to materialize. The viability of the deal will therefore depend less on parliamentary approval than on UNOC’s ability to deliver projects on schedule, control costs, and secure sufficient commercial throughput in a rapidly evolving energy landscape.

The use of dedicated escrow accounts may strengthen fiscal discipline, but it also limits the government’s flexibility over revenues that have yet to materialize.

Olivier de Souza