Illicit cigarette trade costs Kenya Sh47 billion in estimated tax losses

The findings have renewed attention on cigarette smuggling, counterfeit products and the tax gap between Kenya and neighbouring markets.

They also raise questions about the effectiveness of existing controls on tobacco products entering and circulating within the country.

The research puts the share of illicit cigarettes in Kenya's market at 45.1 per cent in 2025, up from 39.5 per cent in 2024.

Kenya's total cigarette market was estimated at approximately 4.24 billion sticks in 2025.

The legal, tax-compliant market accounted for about 55 per cent, down from 60.5 per cent a year earlier.

The study estimates that the government lost Sh47 billion in excise duty and VAT over the five-year period, including Sh10.2 billion in 2025 alone.

These are estimates from research conducted by Kantar Insights East Africa and commissioned by BAT Kenya.

The full technical report and detailed methodology behind the market-share and tax-loss calculations were not available in the published reporting, so the figures should not be confused with an independently audited KRA revenue shortfall.

How illicit cigarettes enter the market

Illicit cigarettes are not limited to counterfeit brands.

The category also covers genuine products traded outside legal channels, including cigarettes on which applicable taxes have not been paid and products imported, manufactured or sold in breach of regulatory requirements.

Smuggling across porous borders is one route.

The Kantar findings point to flows from Uganda and differences in tobacco excise rates between East African markets as factors that may make illegal trade more profitable.

The study also links a 55 per cent cumulative increase in Kenya's cigarette excise duty between 2018 and 2022 with a Sh1 billion decline in excise revenue from the legal cigarette industry over that period.

That comparison does not, on its own, prove that higher taxes caused the growth in illicit sales.

Changes in consumer demand, enforcement, supply chains and cross-border trade can also affect market conditions.

How KRA tracks cigarette taxes

Kenya uses excise stamps to help establish whether manufacturers and importers have met their tax obligations.

KRA's Excisable Goods Management System (EGMS) is designed to track and trace excisable products through the supply chain.

Cigarette packs are among the products that require excise stamps, which may be affixed physically or printed digitally on packaging.

The authority also provides the Soma Label mobile application, which allows consumers to verify the authenticity of excise stamps on products.

In January 2026, KRA separately warned that more than half of excisable goods across the wider market could be illicit or non-compliant.

That assessment covered several product categories, including alcohol, bottled water, soft drinks and cosmetics; it was not a cigarette-specific market estimate.

Enforcement and the public health concern

The government has continued to conduct multi-agency operations against illicit tobacco products.

In July 2026, the Ministry of Health reported that authorities had seized 17,640 packets of cigarettes concealed beneath hides and skins during an operation in Thika.

Seven suspects were arrested, with investigations ongoing at the time of the announcement.

Illicit trade also creates a public health challenge because products circulating outside regulatory controls may not meet the standards required of legal manufacturers and importers.

Kenya has ratified the World Health Organization's Protocol to Eliminate Illicit Trade in Tobacco Products, which calls for stronger supply-chain controls, enforcement and cooperation between countries. Its measures include systems for tracking and tracing tobacco products.