Why Nairobi's wealthy is crying less over rising cost of livingThursday October 13 2022
Rich people living in Nairobi are less squeezed by high prices of goods and services at a time when a majority of Kenyans are grappling with inflation.
Official data show that the average inflation for upper-middle households in Nairobi was at 5.71 percent in June in contrast with that of middle-income (6.25 percent) and lower-income (8.19 percent).
People in the social class spending above Sh184,395 per month have been better placed to absorb higher prices due to higher disposable incomes.
However, the figure is a rise from 4.15 percent in 12 months to June 2021, pointing to a rise in the cost of living affecting all Kenyan households. President William Ruto campaigned on the platform of bringing down the cost of living in his first 100 days in office and reiterated his commitment to doing so when he took power last month.
But his administration is finding it difficult to fulfil the promise. Already the government has failed to subsidise food items like maize flour, leading to a rise in the price of a 2kg packet of the commodity to around Sh200 from Sh100 under a subsidy introduced by his predecessor, Uhuru Kenyatta.
Inflation soared to a 63-month high in September at 9.2 percent from 8.5 percent in August on higher fuel prices, shocks from food shortages and a depreciating shilling.
The inflation surge occurred against the backdrop of the Russia- Ukraine war and Covid-19 pandemic in 2020. The difference in inflation levels among Nairobi’s income segments is linked to their different consumption habits. The rich spend most of their income on transport and the middle class on utilities and rent.
Food takes the bulk of the poor’s budget. The increase in the prices of food items surpassed that of fuel in January this year, with food inflation hitting 15.5 percent in September compared to fuel inflation at 11.7 percent.
The prices of a three-bedroom house rose by 5.6 percent in 12 months to September compared to a similar period in 2021 while those of furnishing and household equipment rose 10.7 percent.
Middle-class homes spend the bulk of their monthly income — over 23.6 percent — on housing and utilities, followed by food at 22 percent, exposing them to rising costs.
The lower-income residents in Nairobi and in rural areas will be hit hardest by inflationary pressures that eroded the country’s real wage by negative 3.83 percent last year, down from negative 0.59 percent in 2020.
People in rural areas are hurting the most from the jump in food and non-alcoholic beverages inflation —whose weight in the shopping basket is nearly a third at 32.9 percent — which rose to 15.25 percent in July.