Against all odds, the Kenyan Shilling has started 2026 on a strong footing. Data from the Central Bank of Kenya (CBK) shows the local unit strengthening to exchange at 128.99 against the US Dollar this morning, a psychological victory that has pushed it below the 129 mark for the first time since December.

Historically, January is a brutal month for the shilling. Importers rush to restock after the holidays, and companies pay dividends to foreign shareholders, creating a surge in dollar demand. Yet, the currency has held firm. Why?

The "Murban" Effect

The primary driver is external. Global oil prices have taken a surprising dip, with Murban crude oil falling to $61 per barrel yesterday, down from $62.51. As a net importer of fuel, Kenya’s dollar demand is heavily dictated by the energy bill. A drop in oil prices means oil marketing companies (OMCs) need fewer dollars to buy the same amount of fuel, easing pressure on the forex reserves.

• Diaspora Remittances: The CBK also credits the relentless flow of diaspora remittances. In December alone, Kenyans abroad sent home record amounts for the festive season and school fees. This inflow has created a dollar buffer that is absorbing the January import demand.
• The Eurobond Factor: Market confidence remains high following the successful buyback of the 2024 Eurobond. Foreign investors, no longer fearing a sovereign default, are slowly returning to the Nairobi Securities Exchange (NSE), bringing in hard currency.
• Regional Stability: Compared to its East African Community (EAC) peers, the shilling is the "cleanest shirt in the dirty laundry pile." The Ugandan and Tanzanian shillings have faced volatility due to local inflation, making the Kenya Shilling a relative safe haven for regional traders.

What This Means for You

A stronger shilling is good news for the cost of living. It acts as a shield against imported inflation.

• Electricity Bills: The Forex Adjustment component on Kenya Power bills should theoretically drop in next month's reading.
• Fuel Prices: With global crude down and the shilling up, the Energy and Petroleum Regulatory Authority (EPRA) will have no excuse not to lower pump prices in the upcoming review on January 14. Analysts predict a drop of at least KSh 5 per liter for petrol.
• Imports: For businesses importing electronics or cars from Japan, the cost of goods has marginally reduced, though it may take time for these savings to reach the consumer.

Cautious Optimism

However, CBK Governor Dr. Kamau Thugge has urged caution. "The global environment is fluid," he warned, citing the unpredictable policies of the Trump administration in the US. If the dollar strengthens globally due to US interest rate hikes, the shilling’s gains could be erased overnight. But for now, the 128.99 print on the forex boards is a welcome sight for a battered economy.