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Nairobi drops from list of most expensive cities

REAL ESTATE
By Peter Theuri | July 8th 2021
A photo of the Nairobi skyline at night [Edward Kiplimo, Standard]

If you ask around, many people will tell you that Nairobi is an expensive city.

Often, this is after comparing it with other towns in the country, and checking prices of goods in a basket that ideally contains products common across Kenya.

But on a global scale, Nairobi is not among the most expensive cities to live in, at least for expatriates. Kenya’s capital is the 145th most expensive city in the world.

Mercer, an American asset management firm, found that the city has actually improved 50 positions in 2021, after ranking 95th in the world last year.

The firm studied 209 cities, with Turkmenistan’s city of Ashgabat the most expensive in the world. Hong Kong, which was top of the rankings last year, was second on the list.

Thirteenth placed N’Djamena, the capital of Chad, is Africa’s most expensive city.

Mercer’s Cost of Living Reports are based on the multinational approach, which assumes expatriates spend the same in the host location, regardless of home country or market.

City-to-city indices help set appropriate allowances.

“We calculate the cost of living allowances for your expatriate assignees in over 400 locations using factual and objective price information. (We also) examine more than 200 goods and services,” says Mercer.

“Carefully chosen vendors reflect only those outlets where expatriates can buy goods and services of international quality.”

The ranking for Nairobi, therefore, points to a city which, at least in 2020, offered pocket-friendly rates for expatriates, helping them cut on expenses amid a tough economic environment.  

Bitange Ndemo, a professor of entrepreneurship at the University of Nairobi, says much of what happened last year will impact a lot of lists, but remains greatly deceptive.

The pandemic disrupted everything and influenced prices as people chose to survive, holding on to the bare minimum.

“This data used is probably from 2020, when the country was reeling from Covid-19 and a lot of things in the economy changed,” says Prof Ndemo.

“Many expatriates ran away from the country. The data may not reflect the true situation as is on the ground - it was captured during a time when there was a sudden unexpected disruption that influenced the economy.”

Most of these expatriates living in Nairobi’s posh suburbs terminated their rental obligations, he says, and were leaving houses where they used to pay Sh400,000 a month.

“The landlords were not willing to lose tenants, and so they reduced rents to, say, Sh200,000. Rent is one of the most significant things people spend on, so such a change impacted the costs of living, thus the study.”

The change in working routines, where people started to work from home, alongside a general fear of going to public spaces, also meant that less was spent on fuel, which among the rich takes a sizeable chunk of their budgets.

“Even mama mboga started to deliver groceries to doorsteps. If you ask me how much I spent on fuel last year, it is nowhere close to what I would have if the pandemic had not come,” Ndemo says.

University of Nairobi economics lecturer Samuel Nyandemo says there are various factors that are used in determining the cost of living, among them the economic stability of a country. This should heavily inform such rankings.

“We are in a better situation than we were last year. The economy has shown some good recovery; it is more stable and the future looks bright,” he says.

“If you look at the stability of the economy and the general flow of services, you can calculate the cost of living.”

This, alongside other factors such as the exchange rate, will determine which city provides the best home for people in terms of how much they spend on food, rent and transport.

Tanzania’s Dar es salaam and Uganda’s Kampala ranked below Nairobi, at positions 167 and 171 respectively, indicating lower costs of living for expats in the two East African cities.

“These countries have a weaker currency compared to Kenya. You definitely have more money if you go in there with your dollar, and the cost of living becomes easier,” says Dr Nyandemo.

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