Uganda’s state-owned National Oil Company (UNOC) is set to acquire a $2 billion loan from Vitol Bahrain EC (VBA) to fund oil-linked infrastructure, including a domestic refinery, pipelines, storage terminals, and roads. For nearly two decades after crude was found beneath the Albertine Graben, this nation has just made one of its boldest financial moves so far.
This is not just another loan. It marks a shift in how Uganda finances strategic infrastructure, how it manages energy security, and how it positions oil as an anchor for broader economic transformation rather than a standalone export story.
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At the centre of this development is a seven-year, $2 billion loan from Vitol Bahrain EC, carrying an interest rate of 4.92%, approved by Uganda’s Parliament following a request from the Ministry of Finance. According to Henry Musasizi, Uganda’s junior finance minister, the borrowing enables access to non-traditional financing at a moment when multilateral lending is tightening, and commercial debt is becoming more expensive.
The financing will underpin a coordinated build-out of Uganda’s oil infrastructure, including a $4 billion, 60,000-barrels-per-day crude refinery, expanded petroleum storage terminals, oil-linked road networks, and the extension of the petroleum pipeline from western Kenya to Kampala. Under the refinery agreement signed earlier this year, UAE-based Alpha MBM Investments will hold a 60% stake while the Uganda National Oil Company retains 40%, ensuring continued state participation in downstream processing. With Uganda targeting the start of commercial oil production next year, the timing of this funding is critical, aligning upstream output with domestic refining, logistics capacity, and energy security objectives.
Vitol is not a new player in Uganda. Through a five-year agreement signed in early 2024, Vitol Bahrain EC became the sole supplier of refined petroleum products to UNOC, which then distributes fuel to over 100 licensed oil marketing companies nationwide.
Between January 2024 and June 2025, UNOC supplied 2.6 billion litres of fuel, including 1.9 billion litres within the first eight months of operations, delivering improved price stability relative to neighbouring countries and boosting fuel-related tax revenues by curbing diversion and eliminating intermediaries. This operational shift elevated Vitol from a mere trading counterparty to a structural partner, now combining supply with financing, and the proposed loan further deepens this interdependence, creating significant opportunities while also intensifying scrutiny over governance, pricing discipline, and long-term market balance.
Uganda’s nominal GDP stood at approximately $56.2 billion in 2024, with projections of $61–65 billion by 2025, driven by services, agriculture, manufacturing, and public infrastructure investment. Oil has not yet contributed meaningfully to GDP, but that is precisely why UNOC’s role matters.
UNOC’s current contribution to Uganda’s economy is largely indirect but strategically significant, anchored in heavy infrastructure investments that attract foreign direct investment, a robust local content programme that has already channelled over $1.7 billion in contracts to Ugandan firms, and an enhanced energy security framework that has reduced fuel shortages and price volatility while improving supply reliability. Through industrial planning initiatives such as the Kabalega Industrial Park, UNOC is also laying the groundwork for downstream manufacturing and value addition linked to the petroleum sector.
As commercial oil production begins, these foundations are expected to translate into direct fiscal and export gains, with annual oil revenues projected to peak at around $2 billion, while the domestic refinery alone could add approximately $3.4 billion to GDP and generate an estimated $804 million in long-term fiscal impact. The $2 billion Vitol loan effectively accelerates this shift, moving Uganda’s oil economy from a prolonged preparation phase into full-scale production and monetization.
Uganda discovered commercially viable oil in 2006, triggering a long policy debate over ownership, revenue management, and national benefit. UNOC was established to ensure the state retained strategic control over petroleum resources.
Over time, Uganda National Oil Company (UNOC) has transformed from a largely passive state shareholder into a central operator across the petroleum value chain, holding equity in the Tilenga and Kingfisher upstream projects, participating in the East African Crude Oil Pipeline (EACOP), assuming control of refined fuel imports, and leading the development of a domestic refinery. The partnership with Vitol, formed in 2023–2024 after Kenya’s procurement policy shifts disrupted regional fuel supply routes, marked a strategic pivot: by re-routing imports through Tanzania’s Port of Dar es Salaam, Uganda reduced supply vulnerabilities, strengthened state oversight of fuel flows, and enhanced its leverage within regional energy markets serving South Sudan, eastern DRC, and Rwanda.
The UNOC–Vitol arrangement has sparked debate, particularly around the risk of monopoly and single-sourcing. Critics warn that making UNOC the sole fuel importer could weaken competition, reduce price discovery, and heighten counterparty risk through dependence on one global trader. Supporters argue the opposite: fuel supply stability has improved, price volatility has eased, tax leakages have narrowed, and large-scale infrastructure requires centralized coordination. Ultimately, the success or failure of this model will hinge less on market structure and more on governance quality, transparency, and effective regulatory oversight.
Beyond the monopoly debate, Uganda faces broader market headwinds. Oil price volatility could challenge refinery economics, while debt sustainability remains a concern if projected oil revenues are delayed. Large infrastructure projects carry execution risks, and the global energy transition introduces uncertainty around long-term fossil fuel demand. Public trust is another constraint, given Africa’s uneven record with resource-backed financing. These pressures mean Uganda must pursue speed without sacrificing fiscal discipline and institutional credibility.
In comparative terms, Uganda is entering oil production later than peers like Nigeria and Angola, but with notable advantages: a relatively cleaner balance sheet, stronger state participation from the outset, and an integrated approach that links refining, storage, and pipelines simultaneously. If well executed, the UNOC–Vitol financing could help position Uganda as a regional fuel hub, lower import dependence, strengthen the trade balance, and catalyse industrial growth beyond oil. This is a calculated risk rather than a blind gamble, an attempt to build an energy system and industrial base, not just export crude, whose outcome will be determined by execution, governance, and long-term discipline.
