Rising Cost of Living in Nairobi - How To Cope

Millions of Kenyans are struggling to stay afloat due to the hike in prices of basic commodities amid rising energy prices and inflation. 

Essential items such as cooking oil, food, fuel, and soap have increased in price, putting a strain on household budgets and reducing demand for goods and services.

According to the Kenya National Bureau of Statistics (KNBS) Economic Survey 2022, the average annual inflation rose to a 4-year-high of 6.1% in 2021 as compared to the inflation rate of 5.4% recorded in 2020.

The increase was mainly attributed to increase in the prices of fuel and food items.

Flash forward to the present day and the situation has taken a turn for the worse with the inflation rate in May 2022 alone (7.1%), the highest it has been in 27 months. Prices have risen across a broad spectrum of goods and services and adversely impacted the cost of living.

Read Also: Rising Inflation: Where Should You Keep, Invest Your Money?

Besides the increased cost of transport, the intermittent rise in the price of petroleum has seen the spike in food prices and pushing the budgets of majority of households beyond the bearable limits

Shrinking Shopping Basket

By checking out essential products and their prices detailed on the websites of popular supermarkets in Nairobi, this is what I found:

• Maize floor (2 Kg) – Soko Ksh205
• 3L Cooking Oil – Fresh Fri Ksh1,242
• Wheat Flour (2 Kg) – Soko Ksh216
• Milk (500 ml) – Daima Ksh67, KCC Gold Crown Ksh54, Kinangop Milk Gold Ksh59, Brookside  Ksh61
• Bread (800 g) – Superloaf Butter Toast Ksh118
• Salt (500g) – Kensalt Ksh15
• Rice (2 Kg) – Daawat Basmati Ksh765, 
• Sugar (1Kg) – Kakira Ksh124, 
• Spaghetti (500G) – Santa Lucia Ksh210

If you were to buy one of each of the items above, it would amount to Ksh2,949 - (assuming you’d go for the cheapest brands. You’d also most likely get sweets as change after handing the cashier Ksh3,000 in cash.

Add toiletries, farm fresh items some personal items to the list and the total would easily get to the Ksh10,000 mark

If you factor in a young family and add baby items, then quadruple the quantity of each of the items above, you’d get why most Kenyans are choking under the yoke of inflation.

Household shopping worth Ksh10,000 can now fit into 2 medium-size bags, further showing just how a basic food basket has shrunk over the last few years.

Read Also: What Your Budget ‘Should’ Look Like on a Ksh50K Salary (50/30/20 Rule)

What to do

The current scenario in Kenya is a serious cost-of-living crisis that requires everyone to take action. 

Inflation is already bad for your financial future, but it can also make it difficult for you to meet your current financial obligations which might be more urgent and consequential to any future goals you have.

That's why it's critical to have a plan in place to deal with inflation so you don't go over budget or, worse, rely on debt.

Here are a few tips to help survive the sky-rocketing cost of living in not only Nairobi, but upcountry as well.

Scrutinise your spending

The first step should be to calculate the increase in monthly expenses. Then you must determine where you will obtain the funds to fill the gaps.

With fixed expenses such as rent and loan repayments, the first casualty to cut back on is discretionary expenses such as eating out and generally, entertainment expenditure. 

You could also look through your subscription services and cancel what you don't use, or what you don’t really need during these harsh times. It could be your favourite movie streaming site, your gym subscription, or even your bi-weekly gardener...DIY videos can help you tend to your own garden, and how to work out in your own house as well.

The goal is to cut down on the non-essentials to cater for the basics that are now that much more costly.

If you're short on cash right now, it's worth looking into where you can cut any discretionary costs - that is, expenses that aren't necessities like rent, food, and utilities.

Learn More: Spending 101: Skills to Keep Your Expenses in Check

Look for cheaper alternatives

Your previous purchases may no longer be possible within your current budget as prices go higher and higher.

You can think about how to save money on these by looking for different brands or shops, or by purchasing in bulk from wholesalers.

Try less expensive brand name foods and food products, cleaning products etc. and you may just discover that there isn’t a huge difference in the quality or taste.

Carpooling could also be adopted due to the hike in fuel prices, and more recently, a spike in matatu fares as well. It could be time to get to know your neighbours and find a way to make commuting to and from work more affordable.

If you have two cars, maybe trimming it down to just one (the more fuel efficient one) could be something to consider.

Cutting back on entertainment, holidays, or eating out, hobbies, or sports is a personal decision, but you almost certainly have something you can do without.

Read Also: 13 Tips to Live Cheaply But Not Look Cheap

Think about how you can bring in more money

Although the job market is not at its most vibrant, if your skills and experience are strong, you may be able to find a higher-paying position, or even ask for a raise at your current workplace.

Look for online courses that can help you improve your skills, and volunteer for any opportunities that an employer may provide.

Consider diversifying your income streams, whether you are employed or self-employed. A side gig can help you pay off debt or cover unexpected expenses.

Consult with close friends or reach out to mentors in the field you’d be interested in order to know what you’d need to get things started.

Inflation aside, having multiple streams of revenue translates to guaranteed financial success and freedom down the line.

Read Also: 8 Ideas to Create Multiple Sources of Income

Lifestyle adjustment  

Don't be persuaded to live beyond your means or in a hedonistic manner. It will lead to unnecessary debt in addition to quickly depleting funds, whether from savings or regular income.

Hedonism is the belief that pleasure is the most important thing in life. Now, while we are often encouraged to use money on things that bring us happiness, one should also not be guided by impulses, especially during these harsh economic times.

Taking a step back to evaluate the situation and find areas that can be adjusted without ‘killing’ you could be the better alternative.

By diligently saving, shopping sparingly, and avoiding debt if you can't pay it off, you can start living a simple lifestyle.

Read Also: More Money, More Expenses: How To Deal With Lifestyle Inflation

What should one do about debt?

When inflation is high, interest rates are generally increased to bring it under control.

At the end of May 2022, the Central Bank of Kenya (CBK) raised its policy lending rate from 7.00% to 7.50 %.

You need to be aware of the potential impact of this increase on your loan (if any) as well as your budget, and focus on paying down debt before that becomes an issue.

The easiest way to get this information would be to talk with your bank.

Now that the CBK has increased interest rates, changes to credit card interest rates typically follow, usually within a billing cycle or two, this is also information that needs your attention.

Limit the amount of money you can spend on your credit cards. This prevents you from overspending and encourages you to plan ahead of time for your daily expenses, lowering the amount of interest you pay on your loans.

With the cost of everything increasing, more people are likely to fall into debt as the struggle to pay bills and other commitments intensifies.

It is therefore important to look into debt and how to effectively manage it during this period of high inflation.

Read Also: Coping With Debt: How To Deal With Debt of Any Size

WRAPPING UP

The soaring commodity prices mean it’s even more important to take time to think about what you're spending your money on and why. This will then inform you on what you can do without.

After all, if you stop spending money on something, you are no longer affected by inflation in that category.

You need to consciously increase the “return on happiness” of each shilling you choose to spend during these inflationary times. 

While nobody can predict what economic events will unfold in the coming months and years, the tips shared above are easy and practical ways to set yourself up for financial success no matter what the future brings. 

Choose what works best for your personal financial situation and make it work.