Nairobi’s wealthy benefit most from falling inflation

Nairobi’s rich families have had the biggest relief from the easing inflation over the past three months, helped by falling electricity and motoring expenses.

Data from the Kenya National Bureau of Statistics (KNBS) shows that the city’s upper income segment recorded the biggest drop in inflation in the quarter through to October, compared to the lower and middle segment as well as the national average.

The KNBS data shows that average inflation for wealthy city homes stood at 4.33 per cent last month compared with 4.79 per cent for the lower income group and 3.38 per cent for the middle class.

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.

At 4.33 per cent, Nairobi’s wealthy have seen their inflation drop by 5.36 percentage points since August, compared with 3.01 percentage points and 2.7 for the middle and lower income segments respectively.

The national average has dropped by 2.93 percentage points since August. 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.

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.

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

READ: Falling fuel, flour, electricity prices ease inflation pressure

The energy regulator has cut the retail prices of diesel, petrol and kerosene to reflect lower import costs. It cut a litre of diesel by Sh6.15 to Sh94.52 in Nairobi from Sh102.98 in August and that of kerosene by Sh4.57 per litre to Sh76.31 from Sh83.05 three months ago.

The price of petrol fell by Sh4.09 per litre to Sh106.80 and is down Sh10 since August. 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.

Electricity prices have since September dropped by between 18.7 per cent and 27.4 per cent following the injection of 210 megawatts of geothermal power into the national grid, with 140 megawatts having been added in late July and 70 megawatts on September 16.

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 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.