Flour, power and fuel price cuts offer homes reprieve
A woman shops for flour at a Nyeri town supermarket. A drop in maize flour and fuel prices is expected to reduce the inflation rate to within the Treasury’s preferred range. PHOTO | FILE | NATION MEDIA GROUP
What you need to know:
The drop in the three commodities, which have significant impact on household budgets, look set to calm the nerves of policymakers racing to bring inflation within the government’s preferred target.
Flour prices have further reduced by an average of Sh3 following a drop in the cost of maize, a relief to households that will this month pay less for electricity and fuel prices.
Retailers have cut the price of the two-kilogramme packet to Sh110 from Sh113 on increased supply of maize following harvest in the South Rift and imports from neighbouring countries.
Electricity prices will this month drop by between 8.5 per cent and 12 per cent following the injection of 140 megawatts of geothermal power, which has cut the fuel levy on power bills on reduced use of expensive thermal plants. The price of petroleum products yesterday fell by the biggest margin since January 2012, reflecting lower import costs.
The drop in the three commodities, which have significant impact on household budgets, look set to calm the nerves of policymakers racing to bring inflation within the government’s preferred target.
Inflation increased to 8.36 per cent in August from 7.67 per cent in July on rising food, electricity and transport prices, breaching the Treasury target of between 3.5 and 7.5 per cent.
Maize prices have a big effect on inflation given that it accounts for a significant share of poor households’ budget. Fuel also influences the cost of living measure in the economy that depends heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for lighting and cooking.
The Kenya National Bureau of Statistics blamed the inflation uptick last month on an increase in food prices, which accounts for just over a third of the basket of goods used to measure inflation, as well as fuel and electricity prices.
The cost of a 90-kilogramme bag of maize has dropped to Sh2,200 from Sh3,200 in May, offering millers room to cut flour prices. Flour prices stood at Sh118 in May.
Unga Limited managing director Nick Hutchinson earlier this month told the Business Daily that flour prices would continue to reflect the falling cost of buying maize.
Harvesting of the short-rains crop started last month in Bomet and Narok and it is expected to add three million bags to the granary between now and November when the long-rain harvest will commence in the North Rift, Kenya’s bread basket.
Official data show that bus fares for a journey of 250km averaged Sh397 last month, up from Sh348 in August last year. But transport costs are expected to fall following the drop in fuel prices.
The Energy Regulatory Commission (ERC) on Sunday cut the maximum price of super petrol in Nairobi by Sh4.98 per litre to Sh111.64. The price of kerosene, which is mainly used by the poor for lighting and cooking, fell by Sh1.42 per litre to Sh82.79. The drop will help cut the cost of power as the fuel levy, which is charged on electricity bills, is expected to fall further.
A wobbly shilling and heavy reliance on diesel-powered generators to produce electricity, due to low water levels in the hydro-electric dams, have been blamed for the rise in fuel surcharge and forex adjustment costs.
Data from the ERC show fuel cost adjustment has dropped to Sh5.71 per kilowatt hour for bills to be settled at the end of the months from Sh7.22 the previous month because of the140 megawatts of geothermal power.
