Kenya lost an estimated KSh47 billion in excise duty and Value Added Tax (VAT) revenue between 2021 and 2025 through the illicit cigarette trade, according to a new study that warns nearly half of cigarettes consumed in the country are now entering the market outside legal tax and regulatory controls.
The research, conducted by Kantar Insights East Africa and commissioned by British American Tobacco (BAT) Kenya, estimates that illicit cigarettes accounted for approximately 45.1 percent of the total cigarette market in 2025.
The findings suggest that almost one in every two cigarettes consumed in Kenya was illicit, leaving legally compliant manufacturers facing growing competition from cheaper products that evade applicable taxes.
The study estimates that the government lost approximately KSh10.2 billion in potential tax revenue in 2025 alone, up from KSh6.8 billion in 2020. The cumulative five-year loss represents revenue that could otherwise have supported public services and development programs.
The report also points to the economic impact on the formal tobacco industry. Employment supported across the legal tobacco value chain reportedly declined by 4,700 jobs between 2022 and 2025, while the industry's contribution to gross domestic product fell by KSh37.7 billion.
Uganda was identified as the leading source of illicit cigarettes entering Kenya, with the study estimating that 95 percent of the illegal products originated from the neighboring country. Differences in excise duty rates across East African markets, alongside porous border points and enforcement gaps, were cited as factors facilitating the trade.
BAT Kenya Managing Director Sidney Wafula said the growing illicit market was undermining government revenue, legitimate businesses, and employment. The company called for stronger border surveillance, improved investigations, tougher enforcement, and a comprehensive system for tracking tobacco products.
The study also linked the expansion of illicit trade to a 55 percent increase in cigarette excise duty between 2018 and 2022, during which excise revenue from the legal industry reportedly declined by KSh1 billion.
However, because the research was commissioned by a cigarette manufacturer, its findings and policy recommendations should be considered alongside independent evidence and government data.
The report adds pressure on authorities to address cigarette smuggling while balancing tax policy, public health regulation, and enforcement of existing laws.
https://x.com/citizentvkenya/status/2118389700885094434?a=1zLmbzZ0NlFp3lIMumE&s=20
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