Illicit cigarette trade costs Kenya Sh47bn in lost tax revenue, study finds

NAIROBI, Kenya Nov 5 – Almost half of cigarettes consumed in Kenya are illicit, with the trade costing the Government an estimated Sh47 billion in lost excise duty and VAT between 2021 and 2025, according to a Kantar study commissioned by BAT Kenya. The study estimates that illicit cigarettes accounted for 45.1 per cent of total cigarette consumption in 2025, meaning nearly one in every two cigarettes consumed in the country was illicit. It defines illicit cigarettes as products on which applicable taxes have not been paid or which do not comply with other regulatory requirements. The research estimates that the lost revenue could have funded key government programmes, including the construction of about 48,000 affordable houses, the purchase of 19 million bags of subsidised fertiliser or 12 million bags of maize. The study also links rising excise taxes to declining revenue from the legal cigarette industry. A cumulative 55 per cent increase in cigarette excise duty between 2018 and 2022 coincided with a Sh1 billion decline in excise revenue from the legal industry over the same period. It further estimates that between 2022 and 2025, jobs supported across the legal tobacco value chain declined by 4,700, while the industry’s contribution to Kenya’s Gross Domestic Product fell by Sh37.7 billion. Commenting on the findings, BAT Kenya Managing Director Sidney Wafula called for sustained government action to tackle the illicit trade, including stronger border controls, faster investigations and prosecutions, and deterrent penalties. He also called for an enhanced track-and-trace system to strengthen oversight of tobacco products across the supply chain. Wafula warned that the growth of illicit trade could undermine legitimate businesses, government revenue and employment, while exposing consumers to products outside established regulatory controls. He said BAT Kenya remained committed to working with government agencies to combat illicit trade and protect legitimate businesses.