A majority of shops and businesses remained closed yesterday in Nairobi and major towns in the country following protests and a nationwide public transport strike over fuel price hikes, triggering billions of shillings in losses.
Key roads in Nairobi remained largely empty, forcing some commuters to walk to work, with other parts of the country like Nakuru, Mombasa and Eldoret also affected by the transport crisis.
Businesses in parts of Nairobi remained shut, and schools asked students to stay at home, leading to revenue losses for enterprises and county governments.
In Nairobi and elsewhere across the country, police clashed with protesters, using tear gas to disperse them.
This came amid reports of demonstrators stopping and harassing some motorists.
Kenya’s fuel prices hit a record high on Friday, with the diesel price increasing by 23.5 percent to Sh242.92 a litre in Nairobi and petrol by 8.0 percent to Sh214.25, ushering in pain to businesses and households from record inflation.
Policy pressure
President William Ruto, who has been out of the country, is yet to comment on the new prices, and is expected to make a call to increase subsidies or make further tax cuts to ease the burden on households and businesses and curb protests in the months to the elections.
Kenya has hinged part of its response on a Sh75 billion in emergency funding from the World Bank, it has sought to help it manage the economic shocks triggered by the Iran war.
‘I am sure as a government we will sit again when the President comes back and convenes the Executive. He will have to look at what else we can do about the fuel prices,’ Treasury Cabinet Secretary Mbadi said on Monday morning.
But Mr Mbadi fell short of disclosing whether the intervention will include a cut in taxes, an increase in subsidies or both.The high cost of fuel is being blamed for increases in the price of food and other basic goods and services, with public service vehicle operators already raising commuter fares.
Last month, the government cut value-added tax (VAT) on fuel from 16 percent to 8.0 percent until July, but there have been calls for it to do more.
It has also offered subsidies to curb sharp increases, especially of petrol and diesel, but the fund it has used to offer below-market-price fuel is facing depletion.
This has increased calls for the State to unleash more public money to help businesses with fuel bills.
Many governments, from Europe to Africa and Asia, have already introduced a ?raft of funding measures, including fuel price caps and tax cuts, to try to contain the Iran war’s economic fallout.
The proposed changes are viewed as temporary, introduced specifically to ?address the energy outcome of the Iran war.
Regional response
South Africa cut fuel levy on petrol and diesel from April, while Zambia temporarily suspended excise duty on fuel and lowered VAT on the commodity to zero in order to shield citizens from the skyrocketing fuel prices.
Namibia reduced fuel taxes by half while Comoros suspended new fuel levies that were introduced last week.
Industry lobby Kenya Association of Manufacturers (KAM) on Monday sought urgent State intervention targeting a string of taxes and levies loaded on fuel prices.
‘The government should consider reviewing various fuel-related taxes and levies to ease pressure on the economy and protect the competitiveness and productivity of local manufacturers,’ KAM said in a statement.
‘Such measures would play a critical role in lowering the cost of commodities, stabilising supply chains, and supporting broader economic recovery.’
Subsidy strain
An analysis shows that taxes and levies account for 34.5 percent in every litre of petrol and 28 percent of a litre of diesel, compared to 40 percent and 36 percent respectively last month, following the halving of VAT to 8.0 percent.
The Roads Maintenance Levy (RML) is the single biggest duty on fuel at Sh25 per litre of petrol and diesel, followed by VAT, excise duty, Petroleum Development Levy (PDL), Railway Development Levy and the Import Declaration Fee.
Mr Mbadi said that the government had lost an estimated Sh24 billion in fuel taxes due to the halving of VAT to eight percent from April 15.
He reckoned that only Sh5 billion is remaining in the Petroleum Development Levy, which is used for fuel subsidies and is collected from motorists at the rate of Sh5.40 per litre of petrol and diesel.
The government announced that Sh6.2 billion was used to subsidise fuel prices in the monthly cycle ending April 14, and a further Sh5 billion in the current round ending May 14.
Kenya, like many other African countries, relies heavily on fuel imports from the Gulf, a supply route disrupted by the US-Israel conflict with Iran that began on February 28.
Even though a ceasefire has been declared, fuel prices have remained high as the Strait of Hormuz, where a fifth of the world’s oil passes, is still blocked.
Kenya imports nearly all of its fuel products from the Middle East via government-to-government deals with Gulf suppliers, including Saudi Aramco Trading Fujairah, Abu Dhabi’s ADNOC Global Trading Ltd, and Emirates National ?Oil Company Singapore Ltd.
Former Deputy President Rigathi Gachagua, who joined the opposition after his impeachment in October 2024, has blamed the sharp rise on corrupt businesspeople who want to increase their profit margins.
He compared the fuel prices to those in neighbouring landlocked countries that rely on Kenyan ports for the importation of fuel, such as Uganda, where prices are lower.
Kenya serves as a major transport hub for businesspeople importing goods through the port of Mombasa to be ferried by road.
Aramco Trading Fujairah (ATF) has written to Kenya, stating that its sourcing of petroleum products from ‘other locations’ has come at higher costs, which it would pass on to Kenya, a pointer that the prices would rise further without State intervention.
Inflation rose to 5.6 percent ?year-on-year in April from 4.4 percent a month earlier on costly fuel, making it the fastest rise in seven years.
Update: EPRA, on Monday night, reduced diesel prices by Sh10.06 to Sh232.86 per litre, kerosene rose by Sh38.60 to retail at Sh191.38 per litre in Nairobi, while the cost of petrol remained unchanged.