First Oil Revenue Set to Enter 2026/2027 Budget as Sector Begins Paying Its Way

When the Minister of Finance, Henry Musasizi, presents the 84.3 trillion shillings budget for the 2026/27 financial year on Thursday, one figure will stand out among the revenue projections. The budget comes at a time when policymakers are positioning mineral resources, especially oil and gas, as a major driver of growth, industrial development, and future export earnings. For the first time in Uganda’s history, the government is expecting direct revenue from oil production.

The budget framework paper projects 1.44 trillion shillings in oil and gas revenues during the coming financial year, marking the beginning of Uganda’s transition from an oil-investing nation to an oil-producing one. The inclusion of projections estimated oil revenue to the budget signals the much-talked-about first Oil will be realized this year or before the end of the coming financial year. For nearly two decades, Uganda has spent billions of dollars developing its petroleum sector, financing infrastructure, supporting regulatory institutions, and facilitating investments ahead of commercial production.

Now, with the first oil expected within the next year, the government is beginning to count on petroleum revenues to support public finances. Energy governance expert Siraje Magara Luyima says the inclusion of oil revenues in the budget is one of the clearest signals, yet that Uganda is approaching commercial production.

“If you have read this year’s budget, one indication that we are going to have first oil is having the oil contribution in the budget this year,” Magara said during a recent civil society dialogue on energy financing. The dialogue was organized by the Natural Resources Governance Institute (NRGI) and ACODE under the Civil Society Coalition on Oil and Gas.

According to the projections, the sector is expected to contribute about 1.7 percent of total government revenue if the anticipated 1.44 trillion shillings is fully realized. The projected earnings are expected to come from several streams, including the government’s share of profit oil, taxes, licence fees, and dividends from the Uganda National Oil Company (UNOC).

“The main source of revenue is the government share of production that will accrue as a result of sharing the profit from oil and any dividends that will arise from Uganda National Oil Company,” Magara, an Energy and Extractive Industries Coordinator at Oxfam. Some of the revenue will be in the form of taxes, including capital gain tax, withholding, and income tax. The government expects non-tax revenues, including signature bonuses, rental fees, training fees, and licenses.

Most of these have already been earned during the exploration and development phase. If fully realised, the broader mineral-based industrialisation programme is projected to generate up to USD 25 billion in annual earnings by 2045, positioning the sector as a long-term anchor of Uganda’s economic strategy.

For the current financial year, FY 2025/26, the government had earlier allocated 875.8 billion shillings for mineral-based industrial development, including continued mineral exploration, strengthening the Uganda National Mining Company, and advancing petroleum infrastructure projects. The budget is being presented against a backdrop of improving macroeconomic projections.

The economy is projected to grow by 6.3% to Shs 226.3 trillion (USD 61.3 billion) by the end of June 2025, and is expected to expand by 7% to Shs 254.2 trillion (USD 66.1 billion) by June 2026, and then to double digits once oil production commences. These are higher growth rates compared to the 6.1% achieved in FY2023/24 and 5.3% in FY2022/23.

Uganda’s recoverable oil reserves are estimated at 6.5 billion barrels. Depending on global crude prices, annual revenues could range between US$1.5 billion and US$2.5 billion once production stabilises, according to projections cited by civil society analysts. Under the Public Finance Management Act, petroleum revenues are channelled through the Petroleum Fund, with a portion transferred to the Consolidated Fund for government expenditure, while the remainder is invested through the Petroleum Revenue Investment Reserve for future generations.

As Uganda prepares to join the ranks of oil-producing nations, analysts say the real test will not be how much oil revenue is generated, but how effectively it is managed. “We are expected to improve the way we manage the Petroleum Fund and make sure we follow the law,” Magara said. “As these inflows increase, if we have not tightened enough, we are likely to cause a lot of issues.”

The arrival of oil revenues is expected to slightly ease pressure on domestic revenue mobilisation and reduce dependence on external borrowing. Yet experts caution that petroleum earnings alone will not solve Uganda’s financing needs.

Magara noted that even optimistic revenue projections fall short of the billions of dollars required to finance Uganda’s broader energy transition and development ambitions. For the government, however, the significance of the coming budget lies in symbolism as much as substance.

Whether that contribution becomes a catalyst for development or another missed opportunity will depend largely on transparency, accountability, and prudent management of the country’s newest source of revenue.

In FY 2026/27, domestic revenues are projected to amount to 40.090 trillion shillings, from an estimate of 37.227 trillion shillings in FY 2025/26. This translates into nominal growth in revenues of 2.863 trillion shillings.

This rise is attributed to gains on account of higher economic growth, a widening tax base, improved administrative tax revenue collection measures, and reforms in non-tax revenue collection. Over the medium term, domestic revenues will increase significantly, driven by continued growth in line with the Tenfold Growth Strategy, the introduction of new tax policy measures, enhanced tax administration, higher tax compliance, greater accountability for tax holidays, the elimination of non-beneficial exemptions that do not support the industrialisation agenda, and increased revenues from the oil and gas sector as the country begins production.

According to the Budget Framework Paper 2026/2027, the government commits to promoting the Mineral-Based Industrial Development, Including Oil and Gas. Over 1.698 trillion shillings was proposed to expedite the finalisation of the East African Crude Oil Pipeline (EACOP) and deliver the first oil in 2026.

The funds will also be used to finalise the quantification of mineral deposits, starting with iron ore, gold, and copper, and strengthening their tracking system and their governance regime. Key on the agenda is expediting the construction of the oil refinery and the development of the downstream petrochemical industry. Under the proposed framework for Mineral-Based Industrial Development, including oil and gas, the government has earmarked 1.698 trillion shillings to accelerate a wide range of interventions designed to move Uganda closer to commercial production and value addition.

At the heart of the plan is the continued push to complete the East African Crude Oil Pipeline (EACOP), with the government reaffirming its ambition of delivering first oil in 2026. Alongside the pipeline, authorities also intend to fast-track the construction of the national oil refinery and develop downstream petrochemical industries expected to anchor future industrial growth.

A significant focus has also been placed on strengthening governance in the extractives sector. The plan includes establishing a framework for transparency and accountability in oil, gas, and mining revenues, alongside efforts to improve tracking and management of mineral resources such as iron ore, gold, and copper.

The government also intends to develop mineral markets and buying centres to formalise mineral trading, while expanding capacity for exports and commercialising mining operations. New beneficiation and training centres are expected to be established in Busia, Karamoja, Ntungamo, and Fort Portal as part of efforts to build skills and local value addition. If fully realised, the broader mineral-based industrialisation programme is projected to generate up to USD 25 billion in annual earnings by 2045, positioning the sector as a long-term anchor of Uganda’s economic strategy-URN.

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