Kenya lost an estimated Sh47 billion in excise duty and VAT revenue between 2021 and 2025 due to the illicit cigarette trade, according to a new study by global market research firm Kantar commissioned by BAT Kenya.
The study estimates that illicit cigarettes accounted for 45.1% of total cigarette consumption in Kenya in 2025, meaning nearly one in every two cigarettes consumed was illicit. The study defines illicit cigarettes as products on which applicable taxes have not been paid and which do not comply with other regulatory requirements.
According to the findings, the lost tax revenue could have financed significant investments under the Government’s Bottom-Up Economic Transformation Agenda (BETA). These include approximately 48,000 affordable houses, 19 million bags of subsidised fertiliser, or 12 million bags of maize.
The study also links changes in fiscal policy to declining revenue from the legal cigarette industry. It found that cigarette excise increased by 55% between 2018 and 2022, while excise revenue from the legal industry fell by Sh1 billion over the same period.
The economic impact extends beyond government revenue. Kantar estimates that 4,700 jobs supported across the legal tobacco value chain were lost between 2022 and 2025, while the industry’s contribution to GDP declined by Sh37.7 billion.
BAT Kenya Managing Director Sidney Wafula warned that the growth of illicit trade could have wider economic and public policy consequences, arguing that the issue requires stronger enforcement, border controls and disruption of criminal networks involved in the supply and distribution of illegal cigarettes.
Wafula also called for stronger track-and-trace mechanisms, faster investigation and prosecution of illicit trade offences, and penalties capable of deterring illegal activity.
The report draws comparisons with South Africa, where illicit cigarettes are estimated to account for approximately 75% of the market, according to the press release. BAT Kenya said Kenya risks following a similar trajectory if illicit trade continues to grow.
The findings come as Kenya continues to grapple with the challenge of balancing tax policy, consumer affordability, legitimate business activity and efforts to curb illicit trade.
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