BAT study puts annual losses from illegal cigarette trade at Sh10.2bn

Nairobi, Kenya - A new study commissioned by British American Tobacco (BAT) Kenya and conducted by Kantar research firm has found that the country loses an estimated Sh10.2 billion annually in excise duty and Value Added Tax (VAT) revenue due to illicit cigarette trading. Nearly half of the cigarettes consumed in Kenya in 2025 were found to be untaxed, according to the study.

The illicit market accounted for 45 percent of the Kenyan market, leaving legally taxed products with a 55 percent share. BAT Kenya's Managing Director, Sidney Wafula, expressed concern over the growing illicit market, which raises issues of lost government revenue, the weakening of the formal tobacco industry, and the ability of tax and border enforcement measures to effectively combat the issue.

The share of legally taxed cigarettes has declined by 11 percentage points between 2021 and 2025, falling from 66 percent to 55 percent. The study identified Uganda, Tanzania, and South Sudan as the leading sources of illicit cigarettes entering Kenya, with tax differentials and porous borders providing opportunities for smugglers.

The tax differential between Kenya and neighboring countries, coupled with enforcement gaps, has allowed cheaper untaxed products to enter the market, impacting consumer affordability and pushing price-sensitive smokers towards untaxed alternatives.