Kenya Loses KSh47 Billion to Illicit Cigarette Trade in Five Years

Kenya has lost an estimated KSh47 billion in government revenue through the illegal cigarette trade over the past five years, with illicit products accounting for nearly half of the country's cigarette market in 2025, according to a new study by global research firm Kantar.

The findings, released on Thursday, November 5, 2026, raise fresh concerns about the growing illicit tobacco market and its impact on government revenue, legitimate businesses, employment and the wider economy.

The study, commissioned by British American Tobacco (BAT) Kenya, estimates that illicit cigarettes accounted for 45.1 per cent of total cigarette consumption in 2025. This means that nearly one in every two cigarettes consumed in the country was illicit.

The research defines illicit cigarettes as products on which applicable taxes have not been paid or which fail to comply with relevant regulatory requirements.

Billions in Lost Government Revenue

According to the report, the KSh47 billion lost through unpaid excise duty and Value Added Tax (VAT) between 2021 and 2025 could have financed several major development projects under the government's Bottom-Up Economic Transformation Agenda (BETA).

The report estimates that the amount could have financed the construction of approximately 48,000 affordable housing units, purchased 19 million bags of subsidised fertiliser or funded the acquisition of 12 million bags of maize to support food security.

The figures highlight the potential impact of illicit trade on the government's ability to mobilise domestic revenue and finance essential public services.

Legal Tobacco Industry Faces Growing Pressure

The study also points to significant economic consequences for legitimate tobacco manufacturers and businesses operating across the industry's supply chain.

Between 2022 and 2025, employment supported by the legal tobacco value chain declined by approximately 4,700 jobs, while the industry's contribution to Kenya's Gross Domestic Product (GDP) fell by an estimated KSh37.7 billion.

The research further notes that cigarette excise duty increased cumulatively by 55 per cent between 2018 and 2022. During the same period, excise revenue collected from the legal cigarette industry declined by approximately KSh1 billion.

The findings have renewed debate about the relationship between tobacco taxation, consumer affordability, tax compliance and the expansion of illegal markets.

BAT Kenya Calls for Stronger Government Action

Speaking during the release of the findings, BAT Kenya Managing Director Sidney Wafula warned that the growing illicit cigarette market was undermining legitimate businesses and depriving the government of substantial revenue.

Wafula called for stronger enforcement measures, improved border controls, faster investigations and prosecution of individuals and networks involved in the illegal cigarette trade.

He also advocated for a comprehensive track-and-trace system to strengthen monitoring of tobacco products throughout the supply chain and prevent illegal products from entering the market.

Wafula warned that the consequences extend beyond the tobacco industry, arguing that lost tax revenue could increase pressure on the government to raise taxes or borrow more to finance public services.

He further cautioned that illicit trade exposes consumers to products operating outside established regulatory controls.

Warning Over South Africa's Experience

The report also draws comparisons with South Africa, where illicit cigarettes are estimated to account for approximately 75 per cent of the market.

Wafula warned that Kenya risks experiencing similar challenges if the growth of illegal tobacco trading is not effectively addressed.

He cited the closure of BAT South Africa's only manufacturing facility as an example of the potential consequences of sustained illicit trade on legitimate manufacturing, investment and employment.

The Challenge Ahead

The findings place renewed attention on the government's efforts to combat illicit trade while balancing taxation, consumer affordability and the protection of legitimate businesses.

Stronger cooperation among revenue authorities, law enforcement agencies, regulators and industry stakeholders will be critical in addressing cigarette smuggling, tax evasion and the distribution of non-compliant products.

As Kenya continues to seek additional revenue to finance national development priorities, tackling illicit cigarette trading could become an important part of efforts to protect public finances and strengthen the formal economy.