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Nairobi’s rich benefit most from cheap petrol

Nairobi’s rich families are the biggest beneficiaries of cheap fuel as their inflation hit a new low on reduced motoring expenses.

Data from the Kenya National Bureau of Statistics (KNBS) shows that the city’s upper income segment was the only one to record a drop in inflation in February with the lower and middle segments experiencing higher cost of living measure as well as the national average.

KNBS data shows that average inflation for wealthy city homes stood at 1.74 per cent last month compared with 5.22 per cent for the lower income group and 3.23 per cent for the middle class.

The national average inflation rose to 5.56 per cent from 5.53 per cent while that of the lower and middle income segments increased from 4.88 per cent and 3.22 per cent respectively.

KNBS attributed the differences in the inflation levels among income segments to different consumption patterns, adding that the rich spend most of their income on utilities and transport while the poor use nearly half of their income on food.

MOTORING EXPENSES

“Nairobi’s upper income families have benefited the most from lower fuel prices because motoring expenses account for a larger share of their monthly budgets,” said James Gatungu, director of production statistics at KNBS.

“The increase in fuel prices and an unlikely further drop in electricity bills in the coming months is certainly going to put upward pressure on inflation for the upper segment,” he added.

In March, the Energy Regulatory Commission (ERC) announced a rise in fuel prices, sparking an outcry from consumers who were expecting further drops after enjoying six months of consecutive price cuts.

The average price of a litre of diesel stood at Sh76.49 in February, down from Sh84.30 in January and Sh105.45 in August while that of petrol was Sh83.60 in February, down from Sh93.75 in January and Sh117.45 in August.

FARES REMAINED STATIC

But matatu fares have remained static over the period, meaning that lower income consumers have not benefited from the rock bottom fuel prices.

The data shows that commuters paid on average Sh399.92 for a matatu journey of 250 kilometres in February and Sh397.9 in August despite a Sh28.96 drop in the cost of a litre of diesel.

Fuel prices have a big effect on inflation in Kenya, which relies heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for cooking and lighting.

Transport expenses take the largest share of Nairobi’s rich monthly budget at 27.9 per cent, explaining their exposure to rising motoring expenses.

Housing and utilities account for 19.8 per cent of their budget with clothing taking 7.7 per cent. The city’s middle class spends an average of 22 per cent of their income on food, the wealthy use seven per cent while poor households spend 42.5 per cent.

FOOD PRICES

While food prices have dropped over the past three months, electricity and fuel prices have dropped by a bigger margin since August, offering relief to the top earners.

KNBS defines low-income earners as those spending less than Sh23,670 monthly, middle class (between Sh23,671 and Sh120,000) and upper income as households with expenses in excess of Sh120,000.

KNBS examines consumption data for Nairobi separately because it has increased its share of the national wealth in the past five years despite government efforts to encourage investments outside the city.

Official data shows that the capital city accounted for more than a third of the country’s labour earnings and more than half of the top earners.