Pwani Oil has ceased operations, blaming it on a dollar scarcity that has made it difficult to pay suppliers.
As a result, cooking oil prices are expected to reach an all-time high this week.
“Getting sufficient amount of dollars required to support the factory in terms of getting sufficient raw materials is not happening,” Commercial Director Rajul Malde told Business Daily on Friday.
Mr Malde told the daily that the shut down is temporary as they seek to find a solution.
“We are not even running the plant right now because of lack of raw materials,” he said.
Last week, the Kenya Association of Manufacturers raised concern about the dollar scarcity alleging that its members, who rely on imported raw materials, are unable to obtain dollars at official market rates.
But Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge recently rejected claims of a dollar shortage, claiming that while demand for dollars increased around two months ago, the situation has since normalized.
Dr Njoroge stated that the foreign exchange market transacts roughly $2 billion in US currency per month, which he claimed is sufficient to meet demand from importers and firms for payments.
Cooking oil is one of the commodities whose prices have more than doubled in the last couple of months, with the most recent development implying that prices would only continue to rise.