(Nairobi) – Kenyan motorists and businesses are now paying more in taxes and government levies on petrol than the actual cost of the fuel itself, according to newly released figures from the country’s energy regulator. This marks a significant and troubling development for consumers already grappling with high living costs and persistent economic pressures.
The latest data shows that as of mid-May 2025, the total government-imposed taxes and levies on petrol have reached KSh80.50 ($0.62) per litre, exceeding the base cost of KSh76.72 ($0.59). When other components such as dealer margins and freight charges are factored in, the retail price of petrol in Nairobi has risen to KSh174.63 ($1.35) per litre. This is the first time in Kenya’s history that fuel taxes alone have outpaced the product’s actual market price.
Kenya’s taxation structure for fuel includes eight different charges, among them the Value Added Tax (VAT), Road Maintenance Levy (RML), and excise duty. While these taxes are an important source of revenue for the government, critics say they are becoming counterproductive, placing a disproportionate burden on consumers and businesses.
The institutions that determine the country’s fuel pricing framework—the Ministry of Energy, the National Treasury, and Parliament—have so far resisted calls to adjust the taxation structure, despite consistent pressure from civil society and economic analysts. The apparent rigidity of the current system has led many to question whether the government is prioritising revenue collection at the expense of economic resilience and public welfare.
Although the global market has seen a modest drop in landed fuel costs—by 2.95 percent per cubic metre—this has not translated into any reduction at the pump. This is largely due to the inflexible nature of fuel taxes in Kenya, most of which are fixed amounts per litre or based on percentages, meaning retail prices remain high regardless of fluctuations in global oil markets.
In contrast, the tax components of diesel and kerosene have not yet surpassed their product costs. Nonetheless, the overall trend is worrying, with many experts warning that current taxation policies could stifle economic growth by limiting access to affordable energy.
John Mutua, Programmes Coordinator at the Institute of Economic Affairs Kenya, argues that a major overhaul of the fuel tax system is long overdue. “It is not the right policy design, and that is why you have hue and cry from Kenyans,” he said. “Trying to collect more through high fuel taxes is a myopic approach. It is better to have a moderate rate to incentivise consumption rather than impose high taxes and then introduce subsidies.”
According to Mutua and other analysts, while fuel taxation is necessary, the current structure is neither equitable nor sustainable. They advocate for a system that encourages fuel consumption in a balanced way and supports long-term economic planning rather than immediate revenue generation.
A breakdown of the levies reveals that VAT at 16 percent is the largest single tax on petrol, amounting to KSh24.09 ($0.19) per litre. The RML contributes KSh25 ($0.19), while excise duty adds another KSh21.95 ($0.17). Other levies include the Petroleum Development Levy, Import Declaration Fee, Merchant Shipping Fee, Railway Development Levy, and Petroleum Regulatory Levy.
The government has increased fuel taxes several times since July 2023. These increases have pushed petrol prices above the KSh200 mark ($1.55) for the first time in the country’s history. Notably, the RML rose from KSh18 ($0.14) to KSh25 ($0.19) per litre, despite earlier government assurances that such hikes would only happen if global oil prices dropped significantly.
This shift in policy has contributed to record-high fuel prices, placing additional pressure on transport, agriculture, and manufacturing sectors, which depend heavily on affordable energy.
Although certain levies such as the RML are deemed critical for maintaining road infrastructure, economic experts argue that their rates should be regularly reviewed to ensure they do not harm consumer purchasing power or deter investment in productive sectors.
Since mid-2023, Kenya has witnessed three key tax increases on fuel: the doubling of VAT from 8 to 16 percent, the hike in RML, and a tripling of the Petroleum Regulatory Levy from KSh0.25 to KSh0.75 per litre. These increases have had a compounding effect on overall living costs, triggering inflation in transportation and food prices.
Regionally, Kenya now has the highest fuel prices in East Africa. Petrol in Nairobi costs $1.35 (KSh174.49) per litre, compared to $1.32 (KSh170.61) in Kampala, Uganda, and $1.09 (KSh164.15) in Dodoma, Tanzania. Diesel follows a similar trend, priced at $1.27 in Nairobi, $1.26 in Kampala, and $1.06 in Dodoma.
This disparity has prompted concerns about Kenya’s competitiveness within the region, particularly in attracting investment and maintaining export advantages.
Despite the bleak outlook, there is some cautious optimism. The Finance Bill 2025 does not propose any new fuel taxes, breaking a pattern in which July typically brings additional levies. Nonetheless, analysts caution that unless existing taxes are reviewed and potentially restructured, relief at the pump will remain elusive.