Kenya reinstates fuel subsidy months after scrapping it

Kenya has reinstated fuel subsidy nearly a year after President William Ruto scrapped it on his first day in office.

The government said it reintroduced the Petroleum Development Fund to stabilise pump prices after the landing cost rose. The government will use the money to compensate importers.

Petrol retailed at 194.68 Shillings a litre (N1038; $1.35) in the capital Nairobi on Monday. Diesel and kerosene sold at 179.67 Shillings and 169.48 Shillings respectively, Nairobi-based Nation newspaper reported.

The subsidies will be in place for August and September, and prices of fuel will remain unchanged until September 14, the paper said.

“In order to cushion consumers from the spike in pump prices as a consequence of the increased landed costs, the Government has opted to stabilise pump prices for the August-September 2023 pricing cycle,” Kenya’s energy and petroleum regulatory authority (Epra) said in a statement.

Like Kenya, like Nigeria

The situation in Kenya mirrors Nigeria’s, except that while prices have surged, the Nigerian government has not indicated any plans to intervene.

Like President Bola Tinubu, President Ruto scrapped fuel subsidy on his first day in office last September, even before appointing a cabinet.

The decision drew condemnations as shocked citizens wondered why the government took the decision at a time leaders around the world were introducing subsidies to protect citizens from the rising cost of living.

The government said paying fuel subsidies was too expensive as it cost the country Sh19 billion (N101 billion; $132 million) a month.

The decision was more surprising as Mr Ruto, who based his election campaign on a populist “Hustler” narrative, had promised to improve the lives of ordinary citizens, create jobs and lower the cost of living.

One of his campaign pledges was to remove taxes on fuel to lower its cost and so reduce the cost of basic commodities.

Too expensive

But in his inaugural speech, he said subsidy was unsustainable and had failed to achieve the intended purpose of lowering the cost of living.

“This is equivalent to the entire national government development budget,” he said.

Ending subsidy pushed fuel prices 13% high in Kenya. In Nigeria, the price of petrol rose nearly 200% following the removal of subsidy.

Nigeria’s case has been made worse by currency reform that has made importation of petrol more expensive.

Fuel marketers warned on Sunday that prices will rise to N720 a litre except the naira stabilizes or the government intervenes.

(The exchange rate used here is $1 t0 N766).