Weakening shilling drives up Nairobi highway toll charges ahead of launch

Economy

Weakening shilling drives up Nairobi highway toll charges ahead of launch


Nairobi Expressway along Waiyaki way, Westlands in this photo taken April 16, 2022. PHOTO | JEFF ANGOTE | NMG

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Summary

  • Motorists will pay up to 350 shillings more to use the Nairobi highway after the government revised toll charges to match the strengthening dollar over the past year.
  • Motorists using the road that connects Mlolongo to the Nairobi-Nakuru highway via JKIA will pay between 120 and 1,800 shillings, up from 100 and 1,550 shillings previously.
  • The new rates are based on the dollar rate last December, which was Sh113.14 compared to Sh103.79 over a similar period in 2020.

Motorists will pay up to 350 shillings more to use the Nairobi highway after the government revised toll charges to match the strengthening dollar over the past year.

Motorists using the road that connects Mlolongo to the Nairobi-Nakuru highway via Jomo Kenyatta International Airport (JKIA) will pay between 120 and 1,800 shillings, compared to 100 and 1,550 shillings previously.

The government has increased charges to protect the Chinese investor funding the road from foreign exchange losses following the shilling weakening to record lows against the dollar.

The new rates are based on the dollar rate last December, which was Sh113.14 compared to Sh103.79 over a similar period in 2020.

“The basic toll rates may be adjusted according to the consumer price index and the exchange rate from the date of commercial operation. The USD to Ksh exchange rate as of December 31, 2021 has changed to Sh113.14,” reads the notice issued by Transport Secretary James Macharia.

The toll fee revision aims to cushion Moja Expressway – the Chinese company that operates the road – from the exchange rate based also on the size of the cars and the distance travelled.

The shilling plunged to record lows against the dollar last year after the economy reopened when the Covid-induced overnight curfew was lifted, with businesses signaling growing demand for goods which translated into higher dollar demand from importers.

Those who hold dollars have also become reluctant to ease their positions for fear of further depreciation, limiting the supply of greenbacks that would ease pressure on the local currency.

A weaker shilling leads to higher costs for all dollar-denominated payments due to the need to exchange more units of the local currency for the hard currencies used in international markets.

High-capacity vehicles like transit trucks will pay between 600 and 1,800 shillings to use the highway depending on the distance traveled on the road, while low-capacity vehicles like sedans will pay between 120 and 360 shillings .

Motorcycles and three-wheelers commonly known as Tuk Tuks will not be permitted to use the double-decker road which is nearing completion ahead of schedule.

The road was launched in October 2020 as part of the government’s ambitious plans to reduce heavy traffic on Mombasa Road, which usually runs from Mlolongo to the city centre.

Nairobi Expressway is privately financed and Moja Expressway, a subsidiary of China Road and Bridge Construction (CRBC), will operate it for 27 years to recoup its money before handing the road over to the state.

The company will be free to revise base toll rates each year based on the rate of inflation, with the charge expected to earn the company 302.5 billion shillings in revenue each year.

The review of toll charges comes barely a month after Parliament approved draft regulations to create a fund where funds from toll roads will be kept.

The Public Financial Management (National Road Tolls Fund) Regulations 2021 will establish the National Road Tolls Fund, to implement the Public Roads Tolls Act, Cap 407, which guides the imposition of tolls on the main national roads.

Other routes where motorists will pay toll charges include Nairobi-Nakuru, Nairobi-Mombasa, Nairobi-Thika and the Nairobi Southern Bypass. Urban roads like Jogoo, Lang’ata and Ngong could be targeted.

Kenya introduced toll roads in the late 1980s, but phased them out in the mid-1990s in favor of the road maintenance levy to eliminate corruption at toll stations. The levy is currently charged at Sh18 per liter for petrol and diesel.

Road pricing was conceptualized in the developed world as a form of taxation through which governments could recoup the cost of building and maintaining roads given the huge increase in the number of vehicles.

The system allows a private entity that built a road to charge a fee to recoup its investment before ultimately handing the highway over to the state.

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