How Russia invasion of Ukraine will hit your wallet

The Russian invasion of Ukraine is taking place over 5,000 kilometers away from Kenya, but the impact of this invasion will be felt right in your home. This calls for carefully planning for your money. Here is why:

Fuel prices

Kenya has been using fuel subsidies to keep fuel prices constant at Sh110 per litre of diesel and Sh128 per litre of petrol. However, with the hike in global prices, the National Treasury may not be able to compensate oil dealers with crude oil selling at over $140 per barrel. If there is no fuel subsidy when fuel prices are reviewed on Monday, you may pay up to Sh150 for a litre. This will increase the cost of goods and services. “Your bus fare could be increased by between Sh30 and Sh50,” says socio-economic analyst Zachary Wanyeki. You should also expect your electricity charges to go up due to the increase of diesel prices. Wanyeki points out that prices of all commodities such as maize flour and cooking oil will shoot up either because of power charges or transportation charges. Also the Sh50 boda boda and tuk tuk rides may no longer be tenable if the rider will be paying close to Sh150 per litre of petrol.

The Russian connection

Economic analyst Ephraim Njenga explains that Russia is a leading oil producer with over 10 million barrels per day output. It ranks third after the US and Saudi Arabia. “If Russia cannot sell its oil due to the sanctions imposed by the West, global prices will skyrocket and hurt countries that import oil such as Kenya,” he says. As at March 7 2022, crude oil prices were at a 14-year high of $139 per barrel. Multinational investment bank, JP Morgan estimates crude oil could soar to $185 this year.

Cooking gas

You may have to return to using charcoal because of rising cooking gas prices. Today, to get the 6kg cooking gas, you have to cough up about Sh1,400 which was selling at lows of Sh600 to Sh800 a few months ago. To refill the 13kg cooking gas, you have to pay upwards of Sh3,000 which was trading at below Sh2,000 a few months ago. But even the cost of charcoal will not be as cheap. A month ago, charcoal was selling at Sh60 for a 4-kilogramme tin. “The demand for charcoal will go up especially in informal areas. This will affect the price of basic needs such as food. The kibanda food you buy at Sh30 could start selling at Sh50,” says Wanyeki. But the risk will be higher for the environment. “We are bound to experience increased illegal logging and charcoal burning in many of our water catchment areas,” says Environmentalist Fridah Muyonga. The demand for charcoal could be further exacerbated by the rise in price of kerosene which is used by many. 

The Russian connection

LPG cooking gas is a byproduct of crude oil. Kenya gets its petroleum imports from the Arab League. If Russian oil and gas exports to Europe are banned, Wanyeki says demand will be too heavy on the OPEC producers. Russia supplies about 40 per cent of Europe's gas consumption.

Pricey chapatis

It will be very difficult for you to afford chapatis as a packet of 2kgs of wheat flour will cost you between Sh180 and Sh200. In 2021, this packet was selling at Sh120. Currently, a two-kilo packet of wheat flour is retailing at between Sh140 to Sh160. The cost of bread has also increased to Sh60 for the 400grams loaf. A spot check by the Saturday Magazine shows that the cost of chapos at regular hotels and vibandas is also increasing from Sh10 to between Sh20 and Sh30.

The Russian connection

Kenya imports 75 per cent of its annual demand of 1.2 million metric tonnes of wheat. “Russia and Ukraine were estimated to account for 23 per cent of global exports in the 2021/22 wheat marketing season. Wheat prices in Kenya have been rising because prior to the war, Russia had been limiting exports. This will be aggravated if Ukraine and Russia are unable to export any wheat to Kenya,” says Njega.

Fertiliser

If you were planning to sell your last year’s produce to buy fertilizer and pay school fees in April, you will be shocked to realise that your harvest profit will not be enough. The Ministry of Agriculture expects fertilizer prices to rise to above Sh7,000 for a bag of 50kgs. To afford the fertilizer, you will cough up an additional Sh4,000 this year. This means that you will have to sell more than two bags of 90kg maize to afford one bag of 50kg DAP fertilizer. “The profits you earned from farming will be swallowed by the hike in the cost of production. This cost may be pushed down to consumers later in the year when farmers will be seeking to recover their investment,” says Wanyeki. For example, he says, the cost of maize flour, ugali, githeri, and even chips will rise if farmers hike their prices to match the high fertilizer costs. “The costs will have a trickle-down effect that ordinary people will have to pay for in higher school fees and higher food costs at your local eateries,” says Wanyeki. Since maize is a staple in schools, you will pay more in school fees to match the cost of school meals for your child.

The Russian connection

In 2021, Russia was the world’s largest exporter of planting fertilizer. Kenya gets the majority of its fertilizer from Russia, which it is currently unable to buy.

[email protected]

For feedback to the editor email [email protected]