Illicit cigarette trade costs Kenya 4,700 jobs as illegal market grows to 45%
Kenya’s formal tobacco industry lost an estimated 4,700 jobs between 2022 and 2025 as illicit cigarette trade expanded, a new industry report has found.
A study by Kantar Insights East Africa, commissioned by British American Tobacco Kenya (BAT Kenya), estimates that the formal tobacco sector supported about 75,300 jobs in 2025, down from 80,000 in 2022.
The report attributes the decline to consumers increasingly shifting towards illicit cigarettes, which evade applicable taxes and regulatory requirements.
The employment losses have affected the wider tobacco value chain, including farmers, processors, manufacturers, distributors and formal retailers.
Kantar estimates that illicit cigarettes accounted for 45.1 per cent of Kenya’s cigarette market in 2025, up from 34.1 per cent in 2021. Legally taxed cigarettes held a 54.9 per cent share of the market.
The study estimates that Kenya consumed 4.24 billion cigarette sticks in 2025, with 1.91 billion supplied through illicit channels and 2.33 billion through the formal market.
The growing illegal market has also reduced the economic contribution of the formal tobacco sector. According to the report, the industry’s contribution to Kenya’s economy fell from Sh89.5 billion in 2022 to Sh73.2 billion in 2025, resulting in an estimated cumulative loss of Sh37.7 billion in gross value added.
The government has also lost significant tax revenue. Kantar estimates that illicit cigarette traders evaded Sh10.2 billion in excise duty and VAT in 2025, while cumulative excise and VAT losses between 2021 and 2025 reached approximately Sh47 billion.
Despite an increase in excise duty on filtered cigarettes, revenue collected from cigarettes declined from Sh11.7 billion in 2023 to Sh11.3 billion in 2024 and Sh9.2 billion in 2025.
The report identifies price differences between legal and illicit cigarettes, informal distribution networks, porous borders and limited product tracking as key factors driving the illegal trade.
It notes that cigarettes sourced from lower-priced markets, including Uganda and South Sudan, can enter Kenya and be sold at significantly lower prices.
BAT Kenya managing director Sidney Wafula said the growth of illicit trade was hurting legitimate businesses, jobs and government revenue.
“The growth of illicit trade is not just a challenge for the tobacco industry. It affects jobs, legitimate businesses, government revenue and the wider economy.”
The report calls for stronger enforcement, improved monitoring of tobacco products and measures to address the price gap between legal and illicit cigarettes.
Kantar also cautions that raising taxes without strengthening enforcement could further encourage consumers to shift towards untaxed products.
The study was commissioned by BAT Kenya, with Kantar stating that it independently determined the research methodology, analysis and conclusions.
