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Towns overtake Nairobi in cost of living amid population rise

BUSINESS
By Patrick Alushula | May 11th 2022 | 3 min read
By Patrick Alushula | May 11th 2022
BUSINESS
A general view of the Nairobi skyline. [Elvis Ogina, Standard]

Urban areas outside Nairobi last year overtook the capital city in the cost of living for the first time in seven years.

Official data shows inflation rate — a measure of the rise in the cost of goods and services — for people living in urban areas, including Mombasa, Nakuru, Kisumu and Eldoret, suffered the largest weakened purchasing power compared to any other place in Kenya.

The inflation rate in urban areas outside Nairobi averaged 6.7 per cent last year compared to the national average of 6.1 per cent as captured by the Kenya National Bureau of Statistics (KNBS).

This marked the first time since 2014 that the cost of living in urban areas outside Nairobi has beaten that of the capital's lower-income bracket, which is often used to gauge inflation for urban dwellers.

The increased inflation in urban areas outside Nairobi comes at a time when KNBS findings show that the number of urban dwellers jumped from 12 million in 2009 to 14.8 million in 2019.

Mr Ken Gichinga, the chief economist at Mentoria Economics, says the continued migration of people from Nairobi to towns such as Kiserian, Kajiado, Kitengela and Thika has led to demand-pull inflation, the upward pressure on prices due to a shortage in supply of goods and services.

“There is a big migration away from Nairobi to other urban areas and, therefore, the population and cash in circulation in such areas has increased, leading to demand-pull inflation,” said Mr Gichinga.

“A critical population has moved to satellite areas and transformed the many once backwater areas. Towns such as Kiserian, Kajiado, Kitengela, Ngong and Thika have become part of the city (Nairobi), and people are spending there. Covid-19 accelerated this.”

KNBS data on urbanisation showed seven of the 14 major urban centres — Ruiru, Kikuyu, Thika, Karuri, Ongata Rongai, Juja and Kitengela — are all closest to Nairobi and had a combined population of over 1.74 million in 2019.

At 6.7 per cent, the cost of living in urban areas outside Nairobi is a rise from 5.9 per cent in 2020 and the highest since 2017 (8.2 per cent).

The increased inflation in urban areas outside Nairobi came in the period that Nairobi’s lower-income group — households that were spending Sh46,355 or less per month in February 2016 — enjoyed a reprieve.

“In 2021, the rest of urban areas and Nairobi lower-income group recorded the highest annual inflation rates of 6.7 per cent and 6.0 per cent respectively,” says KNBS in the Economic Survey.

Nairobi’s lower-income group, which makes up 70.89 per cent of all households in Nairobi, saw their inflation ease from 6.2 per cent to six per cent — only beaten by 5.3 per cent in 2019.

But Nairobi’s middle class — households spending between 46,355 and Sh184,394 per month — saw their cost of living jump from 2.6 per cent to 4.2 per cent.

This was as those classified as Nairobi’s upper class — households spending Sh184,395 or more per month — experienced a four per cent inflation compared with 2.6 per cent in 2020

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