According to the latest ranking by consulting firm Mercer, Nairobi is one of the cheapest cities in the world for expats this year, with their purchasing power increasing sharply due to the weakening of the shilling.
In the 2024 city ranking of living costs, the Kenyan capital ranks 201st, falling 28 places compared to the previous year’s figure of 173.
This is one of the cheapest rankings for Nairobi in Mercer’s survey, which compared the costs of more than 200 items, including housing, food, transport and entertainment, across 226 cities. The data was collected in March.
Nairobi, like Lagos, is one of the African cities that has become dramatically cheaper as the devaluation of local currencies more than offset the rise in inflation.
“Currency devaluations were a major reason for these declines,” Mercer said.
“The currency-related cost of living for internationally assigned employees has fallen despite increased inflation in many of these countries,” it continues.
The Kenyan shilling remained almost unchanged at 131.13 units against the dollar at the end of March compared to the same month last year, but had experienced a strong depreciation and recovery in the meantime.
The local currency fell steadily to a record low of 163 units against the greenback in early January before recovering sharply in mid-February.
The devaluation increased the incomes of employees of foreign governments and UN agencies as well as of multinational corporations operating abroad who are paid in hard currency, especially the US dollar.
In addition, it has become easier for their employers to retain and motivate them in a competitive global talent market where cost of living is a major factor in determining compensation.
Nairobi’s decline in the cost of living rankings came despite higher prices for everyday items last year, underscoring the impact of currency gains.
The price of a liter of olive oil, for example, rose by 28.9 percent, the price of men’s jeans rose by 25.8 percent and the price of a liter of gasoline rose by 16.7 percent.
The price of 12 large eggs rose 12.6 percent and the cost of women’s shampoo, haircuts and styling rose 4.1 percent.
The price of espresso at the city’s popular cafes fell 4.7 percent, making it the only item to see a price drop. These goods are part of Mercer’s international basket of goods used in the survey.
“On average, costs have increased for all of these products, with the price increase for olive oil being the most significant,” Mercer said.
“Some cities have seen higher price increases for this good than others. In Buenos Aires, for example, there was a 694 percent increase, while in Istanbul there was a 145 percent increase.”
Nairobi is now cheaper than all cities in the region that have either fallen or risen in the cost of living rankings. Rwanda fell from 191st to 199th, while Kampala slipped from 166th to 177th.
In Dar es Salaam the value fell from 162 to 181, while Addis Ababa became more expensive and rose from 194 to 138.
Nigerian cities are now among the cheapest in the world and are experiencing some of the sharpest declines in the cost of living rankings as the naira collapses against major world currencies.
Abuja is at the bottom of the list with 226 (down from 140th place), and Lagos is second to last with 225 (down from 47th place). The two Nigerian cities thus replace Pakistan’s Karachi and Islamabad as the cheapest locations.
The most expensive cities in the world remained unchanged, led by Hong Kong, followed by Singapore, Zurich, Geneva and Basel (in that order).
The weakening of local currencies has helped make many African cities more affordable for expats, as inflation rates there have been dwarfed by sharp fluctuations in foreign exchange markets.
In Kenya, for example, inflation peaked at 9.23 percent in February last year and fell to a new low of 4.31 percent last month.
The schilling had lost 23.2 percent of its value by the beginning of January this year, before recovering in the following months to the level at which it was trading in March 2023.
In Nigeria, inflation rose by 20 percent in the year to March 2024, a period in which the naira lost two-thirds of its value against the dollar.
Exchange rate gains are rising faster than inflation, increasing expatriates’ purchasing power and making it cheaper to pay for food, transport and entertainment in the local currency.
According to Mercer, the cost of living is just one of the factors that make a location attractive to top talent. None of the cities at the top and bottom of the rankings offer quality of life at a reasonable cost.
“According to Mercer’s latest data, only eight cities in the ranking have achieved this (Ljubljana, Montreal, Warsaw, Zagreb, Budapest, Panama City, Santiago and Kuala Lumpur),” Mercer said.
