The Central Bank of Kenya, on Tuesday, February 13, set the US Dollar to Kenyan Shilling exchange rate at Ksh158.66 ahead of tomorrow’s fuel review by the Energy and Petroleum Regulatory Authority (EPRA).
CBK’s current exchange rate is contrary to commercial banks and other financial entities which set the rate at Ksh156, Ksh157 and others at Ksh158 as the shilling continues to gain strength against the dollar.
Last week, CBK announced that the shilling would continue to stabilise in February and March, attributing the gain to favourable diaspora remittances and the thriving Tourism industry.
The announcement came in the backdrop of the shilling recording a historic high since 2021, gaining 1.8 per cent against the dollar in five days of consecutive growth.
This significant growth from a previous 21 per cent fall recorded in December 2023 offered traders a major boost as import prices of various products recorded a drop too.
In efforts to strengthen the shilling, CBK increased the base lending rate from 12.50 per cent to 13 per cent, to attract foreign investors looking for better returns and to also stabilise the local currency.
“There is a need to adjust the monetary policy stance to address the pressures on the exchange rate and mitigate second-round effects,” CBK’s Monetary Policy Committee (MPC) noted.
EPRA and Dollar Exchange Rate
EPRA uses the previous month’s dollar-shilling exchange rate in its fuel review.
On January 14, while issuing fuel prices for January 15 to February 14, EPRA stated that the exchange rate stood at Ksh158.81 in December.
On December 14, it stated that the prices were based on the November exchange rate which stood at Ksh157.52 which was contrary to CBK’s Ksh153.
Energy CS, Davis Chirchir, was among the stakeholders and a section of Kenyans who questioned the parallel ratings and sought clarity on whether EPRA could refer to the ratings provided by CBK.
Chirchir noted that the authority procured the country’s oil products using a rate 6 units higher than the rate published by CBK.
“For the month obtained, why is one bank opening the spread at Ksh160 to the Dollar while the market should be at Ksh153?” Chirchir questioned.
“What EPRA will do as an independent regulator, because I’m not here to give directives to an independent body, is to write to CBK,” Chirchir stated, adding that CBK and EPRA would confirm whether the rate was Ksh157 or Ksh153.
He also emphasised that his Ministry would employ the CBK going forward and that if EPRA was found to have used a false rating, the consumers would be refunded the extra money spent on fuel.
No progress has yet been witnessed on the advice issued by the CS.
February 14 Fuel Review
According to CBK, the dollar traded with the shilling at an average of Ksh160 in January.
It is yet to be clear whether EPRA will once again use a parallel rating to CBK’s for the February 14 fuel prices.
Petrol, Diesel and Kerosene have been retailing at Ksh207.36, Diesel at Ksh196.47, and Kerosene at Ksh194.23 for the period between January 14 and February 13, 2024.
EPRA decreased the prices by Ksh5 for Petrol and Diesel and Ksh4.82 per litre for Kerosene.
Recently, international oil market prices dropped, with petrol falling by 10.66 per cent, diesel by 11.20 per cent and kerosene by 5.82 per cent, prompting Kenyans to expect low fuel prices tomorrow.