Egypt hikes fuel prices as it scales down on subsidies

From the newsletter

Diesel prices for April increased only in Nigeria and Egypt and decreased in Kenya and South Africa. The prices in Egypt for petrol, diesel, and other energy products went up by up to about 15%, the fourth such increase since March 2024 and the first this year. This is according to our Renewables Rising database that tracks electricity and fuel prices in Africa.

• Egypt's price hikes come just weeks after the International Monetary Fund (IMF) approved a fresh $1.2 billion disbursement to Egypt, following the fourth review of the country’s economic reform programme.

• In Nigeria, fuel prices increased even after the Dangote Refinery started supplying its fuel. South Africa saw the most significant decline in diesel price by $0.05 per litre. Electricity prices remained unchanged in South Africa and Nigeria but had very minimal changes in Kenya and Egypt, with an increase of $0.001 per kilowatt hour.

More details

• Diesel, which is widely used in Egypt's transport and industry, jumped to 15.50 Egyptian pounds ($0.30) per litre from 13.50 pounds — a 14.8 percent increase. Petrol prices rose across by 2 pounds across all grades, with the highest now retailing at 19 pounds. The prices will apply for the next six months.

• In 2024, Egypt committed to reducing subsidies. It spent about $197.71 million on fuel subsidies each month in 2024. The government has planned to bring the price of fuel products to cost recovery by the end of December 2025.

• Kenya's fuel prices have continued their decline since they peaked in October 2023, reducing by about 21% in the same period. The prices have been coming down, enabled by currency stability, which has remained stable for over a year now and the global decline in oil prices. Though electricity prices increased by roughly $0.001 after a decline in February, this was mainly due to an increase in the fuel cost charge, which accounts for diesel generation in the electricity mix.

• In Nigeria and South Africa, electricity prices are typically reviewed annually and remain in effect for the entire year. However, Nigeria has the flexibility for interim adjustments to reflect significant market changes, such as currency devaluation, as occurred last year.

• Many African countries historically subsidised their fuel to shield consumers from volatile markets. However, this has become financially burdensome for governments, leading them to reduce subsidies to redirect resources towards other development projects. Nigeria and Kenya have already eliminated fuel subsidies, while Egypt is gradually phasing them out.

Our take

• The reduction in subsidies is set to change market dynamics. Renewable energy prices have declined to the point of competing with fossil fuels, and this will only make the renewable sector more competitive.

• It is high time African countries prioritise renewables. The subsidies that have supported fossil fuels for a long time can be redirected to development projects or rechanneled to subsidise renewables, especially for countries where renewable energy adoption is still nascent.

• The increase in fuel prices will make ownership and maintenance of fuel vehicles more expensive. As there is already a move towards electric vehicles, governments should be keen to focus on meeting the expected increase in electricity consumption for charging them. This can be done through renewables for better sustainability