Illicit Cigarette Trade Costing Kenya Over Sh9 Billion Annually, New Report Shows

Kenya is losing more than Sh9 billion annually in potential tax revenue due to the rapidly growing illicit cigarette trade, according to a new report by international research firm Kantar.

The study reveals that the illicit cigarette market has surged to a record high, with about 37 per cent of cigarettes sold in the country not paying taxes, up from approximately 27 per cent the previous year.

Nearly all of these illegal products are smuggled into Kenya, highlighting persistent weaknesses in border controls and enforcement mechanisms.

The findings have prompted renewed calls for action from British American Tobacco (BAT) Kenya, which warned that the unchecked growth of illicit trade poses a serious threat to the country’s economy, security, and legitimate businesses.

BAT Kenya Managing Director Crispin Achola said the situation was alarming, noting that the illegal cigarette trade is depriving the government of much-needed revenue while undermining the livelihoods of thousands of Kenyans involved in the legal tobacco value chain.

He emphasized that illicit trade should be treated not just as an economic problem but as a matter of national security and public interest, calling for urgent, coordinated, and multi-pronged interventions to seal loopholes exploited by smugglers.

Data from the Kenya Revenue Authority (KRA) further underscores the scale of the problem. In the last financial year, the value of smuggled and counterfeit goods seized at Kenya’s entry points rose to Sh243.5 million, up from Sh200 million the previous year.

Cigarettes remain among the most commonly intercepted illicit goods, with enforcement agencies reporting increasingly sophisticated smuggling tactics, including concealment within legitimate cargo and tampering with tracking systems to evade detection.

The rise in illicit cigarettes has also been linked to declining excise tax collections from tobacco products, as consumers turn to cheaper illegal alternatives in response to higher prices of legally taxed goods.

Analysts point to cross-border price differences and porous borders, particularly in western Kenya and along coastal entry points, as key drivers of the illegal trade.

Stakeholders are now urging the government to strengthen border surveillance, enhance inter-agency cooperation, invest in modern detection technologies, and work more closely with regional partners to disrupt smuggling networks. Without decisive action, experts warn that Kenya risks continued revenue losses, weakened public finances, and the entrenchment of organized criminal networks that thrive on illicit trade.