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Nairobi’s rich biggest gainers as inflation hits 19-month low

Inflation has eased to a19-month low on Nairobi’s rich families this month, making them the biggest beneficiaries of fuel and electricity whose prices have been falling in the last five months.

Data released by the Kenya National Bureau of Statistics (KNBS) on Friday shows that the inflation for city’s upper income households stood at 2.05 per cent last month down from 3.19 per cent in December and 9.58 per cent last August.

At 2.05 per cent, the cost of living measure is the lowest since June 2013 when it stood at 1.68 per cent.

This is the fifth monthly drop in inflation for Nairobi’s rich families which helped cut the overall inflation to 5.53 per cent in January down from 6.02 per cent the previous month helped by lower prices of fuel, electricity and key food items.

FARES GO UP

But KNBS data shows despite deep cuts in fuel prices, matatu and bus fares went up last month compared to a similar period last year — showing private motorists are the ones enjoying lower petroleum prices.

Fares for a 350km ride in a matatu went up 10.4 per cent to Sh403.45 last month compared to a similar period  last year while that of a 350km country bus journey increased by 6.8 per cent to Sh964.01.

“This is a concern for us,” said James Gatungu, director of production statistics at KNBS.

At 2.05 per cent, Nairobi’s wealthy have seen their inflation drop by 7.53 percentage points since August, compared with 3.17 percentage points and 2.66 for the middle and lower income segments respectively.

KNBS attributed the contrast 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.

Nairobi’s middle class spends on average of 22 per cent of their income on food, the wealthy use seven per cent while poor households spend 42.5 per cent.

But the city’s wealthy on average spend the largest portion of their income on transport at 27.9 per cent, explaining their exposure to rising motoring expenses.

Nairobi’s lower income segment saw its inflation ease marginally to 4.83 per cent down from 4.87 per cent in December and 7.49 per cent five months ago.

The middle-class homes’ eased to 3.22 per cent last month from 3.61 per cent in December and 6.39 per cent last August.

FOOD PRICES

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

Before August, Nairobi’s upper income households were the most exposed to inflationary pressures, signalling a shift that has seen the city’s poor the hardest-hit.

The national average has dropped by 2.83 percentage points since August.

The Energy Regulatory Commission mid-month cut the retail prices of diesel, petrol and kerosene to a five-year low to reflect the rock bottom crude prices.

It reduced a litre of petrol by Sh23.74 to Sh92.88 in Nairobi since last August and that of diesel by19.63 to Sh83.35 per litre.

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 for cooking and lighting.

Electricity prices have since September dropped by between 24 per cent and 29 per cent following the injection of 280 megawatts of geothermal power into the national grid.

The bureau defines low-income earners as those spending less than Sh23,670 monthly, middle class (between Sh23,671 and Sh120,000) and upper income earners 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 over the past five years despite government efforts to encourage investments outside the city.