Illicit Cigarette Trade Costs Kenya KSh47 Billion in Lost Tax Revenue
Illicit cigarettes accounted for 45.1% of Kenya’s cigarette consumption in 2025, according to new Kantar research.
Kenya lost an estimated KSh47 billion in excise duty and VAT revenue between 2021 and 2025. The losses resulted from illicit cigarette trade, according to a new Kantar study.
The research, commissioned by BAT Kenya, estimates that illicit cigarettes made up 45.1% of total consumption in 2025. In other words, almost one in every two cigarettes consumed in Kenya was illicit.
The study defines illicit cigarettes as products on which applicable taxes have not been paid. It also includes products that fail to meet other regulatory requirements.
Illicit Trade Affects Government Revenue
The report highlights the impact of illegal cigarette sales on tax collection. It estimates that the KSh47 billion lost could have supported several government programmes.
For instance, the amount could have funded about 48,000 affordable housing units. It could also have purchased 19 million bags of subsidised fertiliser or 12 million bags of maize.
The study further links tax increases to declining excise revenue from the legal cigarette industry.
Between 2018 and 2022, cigarette excise duty rose by a cumulative 55%. However, excise revenue from the legal industry fell by KSh1 billion over the same period.
Jobs and Manufacturing Also Affected
The impact goes beyond lost tax revenue. Kantar estimates that 4,700 jobs across the legal tobacco value chain disappeared between 2022 and 2025.
Additionally, the industry’s contribution to gross domestic product declined by KSh37.7 billion during the period.
BAT Kenya Managing Director Sidney Wafula said the findings show the wider economic impact of illicit trade. He called for stronger enforcement and better border controls.
He also urged authorities to disrupt criminal networks involved in supplying and distributing illegal cigarettes. Furthermore, he highlighted the need for an effective track-and-trace system to improve oversight across the supply chain.
Calls for Stronger Enforcement
Wafula called on government agencies to sustain their efforts against illicit trade. He also urged authorities to speed up investigations and prosecutions.
In addition, he called for penalties that provide a meaningful deterrent to offenders.
The study draws comparisons with South Africa. There, BAT estimates that illicit cigarettes account for about 75% of the market.
BAT Kenya says it remains committed to working with regulators and enforcement agencies. The company says these efforts are important in protecting legitimate businesses and government revenue.
The findings add to the debate on excise tax policy and illegal trade. They also highlight the need to balance revenue collection with effective enforcement.
