Fuel price increase hits Kenyan households as services, goods cost up

The sharp rise in fuel prices has sent shockwaves across Kenya’s economy, triggering a cascade of cost increases expected to hit households and businesses hard.

From road and air transport to manufacturing, construction, tourism, agriculture, retail and wholesale trade, shipping, small businesses and services, the economy has been thrown into the deep end.

Rising operating costs are setting the stage for runaway inflation, with electricity bills also set to rise.

Yesterday, commuters were hit by a surge in fares on different routes across the country.

For instance, bus fares between Mombasa and Nairobi have risen by between Sh300 and Sh400, depending on the bus company.

Travelling from Nairobi to Mombasa by bus now costs an average of Sh2,000, up from between Sh1,600 and Sh1,700.

Trips from Nairobi to the Western and Nyanza regions now cost an average of Sh1,700 at most bus companies, with fares rising to as high as Sh2,000 depending on the distance.

Fares from Mombasa to upcountry destinations are averaging Sh3,000, up from Sh1,600.

“Following the recent fuel price review announced by EPRA, we have undertaken a careful operational assessment and implemented a necessary adjustment to our fare structure to sustain service quality across all routes,” ENA Coach, one of the main operators on the Nairobi–Narok–Nakuru, Kisumu–Kisii, Malaba and the wider Western and Nyanza routes, said in a notice.

Travellers who had booked earlier were yesterday forced to top up the difference to travel.

City and inter-county fares have also increased, with Nairobi fares rising by an average of Sh20 to Sh30.

“We don’t have a choice because fuel is everything. Apart from daily operations, higher prices also translate into costlier spare parts and maintenance. Fares have gone up by 30 per cent,” Matatu Owners Association president Albert Karakacha said.

This means a distance that previously cost Sh50 now costs commuters an average of Sh70, with most routes now averaging between Sh80 and Sh120.

In Kisumu, fares have increased by as much as Sh40 on some routes as operators respond to the fuel increases.

“I was headed to Riat in Kisumu and normally we pay Sh50, but when I got to the matatu I was told it is Sh100 because of the fuel price. There is nothing I could do but just pay, meaning I have to plan myself ahead because of this,” Chris Wayanga, a commuter, told the Star.

Michael Wachira, a motorcycle rider, said the fuel price hike has forced them to increase fares to remain in business.

Inter-county motorcycle fares have increased by between Sh50 and Sh100.

Parents should also brace for adjustments in school transport once schools reopen, as institutions move to factor in the impact of rising fuel costs.

Commercial long-distance transporters have also announced freight charge increases, meaning commodity prices are set to rise.

According to the Kenya Transporters Association, the significant increase in diesel prices — which have risen by Sh40 per litre, representing an increase of about 24.5 per cent — translates into an estimated 13 to 14 per cent rise in overall transport operating costs.

Fuel constitutes the single largest cost component in road freight transport, accounting for about 55 per cent of total operating costs, the KTA noted, as it called on members to make the necessary adjustments to absorb the shock.

“It is necessary for all members to immediately review their cost structures and adjust transport rates accordingly to reflect the new cost realities,” KTA chairman Newton Wang'oo said.

This means moving a container between Mombasa and Nairobi, which averages between Sh80,000 and Sh115,000, could rise by up to Sh14,000.

Taxi drivers and ride-hailing operators are also under pressure. Many say the current fare structures no longer reflect the reality of fuel expenses, forcing them either to increase charges or absorb losses.

“Following the recent fuel price review announced by EPRA and the ongoing rise in operational costs, we, the Organisation of Online Drivers, have set a new minimum fare for short trips to ensure sustainable earnings for our drivers. Minimum fare: up to 3km distance, Sh450,” the lobby representing drivers under Uber, Bolt, Yego and other ride-hailing apps said in a statement.

The Sh450 minimum fare, they said, will ensure drivers earn a fair and sustainable income amid the changing economic environment.

The Kenya Association of Manufacturers has also cautioned about possible commodity price increases, noting that fuel is a key input in the manufacturing value chain — from sourcing raw materials to distributing final products.

Kenyan manufacturers also use substantial amounts of fuel in their processes in the form of diesel, industrial oil and heavy fuel oils.

“The increase in fuel prices is expected to further drive up the cost of production for manufacturers, resulting in more pain for consumers who are already struggling to make ends meet,” CEO Tobias Alando said in a statement yesterday.

“Transport of inputs and finished products is dependent on diesel-reliant vehicles. Some manufacturers also use petroleum products as raw materials in production. Ultimately, with the increase in fuel prices, the cost of production and distribution of final products is also expected to rise significantly,” he added.

This means fast-moving consumer goods, including personal care and processed foods, beverages such as tea and coffee, hair care products, home care products and textiles, are likely to record price increases.

The spike in diesel prices also means large-scale agricultural activities have been affected, translating into rising food prices for items such as maize, wheat flour, tomatoes and potatoes.

High delivery costs will also push up prices of milk and other farm produce, including basics such as sukuma wiki and cabbages.

For instance, Peter Karanja, a horticulture farmer from the Kambirwa area in Kiharu constituency, said any rise in transport costs causes a ripple effect that eats into his earnings.

On a normal day, Karanja hires vehicles to transport his produce to Mukuyu market in Murang’a town at Sh1,500 per trip. However, the rise in fuel prices means this will increase significantly, reducing his profit margin, which he will be forced to recover by increasing prices.

Farmers in the North Rift, Kenya’s food basket, said the fuel price increase has caused an immediate rise in the cost of farming.

Most farmers in the high-producing counties of Trans Nzoia, Uasin Gishu and Nandi use heavy farm machinery that runs on diesel.

“There is already a rise in the prices of farm inputs which I bought today because of the increase in diesel and petrol prices. I have paid more to transport fertiliser and other inputs,” said Ben Kipkorir, a farmer in Trans Nzoia.

For farmers, the cost of farming is estimated to have increased by more than 30 per cent, which will be passed on to the market and eventually to consumers.

This comes even as Kenya’s prevailing economic situation remains characterised by a high cost of living, low purchasing power, soaring unemployment levels, a widening trade deficit and a heavy public debt burden.

According to the Consumer Federation of Kenya, headline inflation figures may suggest stability for political optics, but they mask a deeper reality: real incomes have continued to decline significantly.

“Wages have failed to keep pace with the rising cost of essentials — food, transport, electricity, rent and taxation. The result is that households have little or nothing left after meeting basic needs. Yet the expenditure side keeps climbing,” Cofek secretary general Stephen Mutoro told the Star.

While the government has stepped in with partial subsidies to cushion consumers, the relief appears limited as the broader economic impact begins to unfold.

Industrial players say high fuel prices will erode already thin profit margins and could lead to reduced production or higher product prices.

Small and medium-sized enterprises (SMEs), which often lack the financial buffers of larger corporations, are particularly vulnerable.

The energy sector is also feeling the strain. Diesel is a key component in thermal power generation, especially during periods of low hydroelectric output.

As fuel prices rise, electricity generation costs increase, raising the likelihood of higher power tariffs in subsequent billing cycles.

The fuel cost component in electricity is expected to rise from the current Sh3.57 per kWh, meaning higher power bills once new cost charges are gazetted.

Energy analysts warn this could create a feedback loop, where higher electricity costs further increase production expenses in manufacturing and services, compounding inflationary pressures.

The aviation industry is also affected as jet fuel prices rise alongside diesel and petrol, prompting airlines to review ticket pricing.

Effective April 1, local airlines, including Skywards, adjusted fares on domestic routes by applying a fuel surcharge to all tickets.

The airline attributed the move to sustained increases in international fuel prices that have “significantly” raised the cost of operating flights.

International airlines have also reduced flight frequencies and increased ticket prices, a move that could dampen international travel and affect international arrivals to Kenya.

This comes at a critical time for the tourism sector, which has been recovering steadily in recent years, with international arrivals hitting a record 2.7 million.

Tour operators are also considering adjusting travel packages, while hotels are expected to factor higher operating costs into their pricing.

“Every component of a tourism package, from airport transfers to game drives, is affected by fuel prices. We are having to revise our rates and that could make Kenya less competitive as a destination,” tour operator Peter Kamau told the Star.

Even large-scale infrastructure operations are not immune. The Standard Gauge Railway, operated by the Kenya Railways Corporation, relies on diesel-powered locomotives.

Higher fuel costs could increase operational expenses, potentially leading to higher cargo and passenger tariffs.

This could undermine the SGR’s role as a cost-effective alternative for bulk cargo transport, especially for goods moving between the port of Mombasa and inland destinations.

Businesses across sectors are now bracing for a period of heightened uncertainty. Many are reviewing pricing strategies, cost structures and investment plans in response to the fuel shock.

Economists warn that the cumulative effect of rising fuel prices could slow economic growth, as higher costs dampen consumer spending and business activity.