Kenya’s booming illicit cigarette market is largely fed by Uganda, which accounts for most contraband tobacco products entering the country. This has deprived the government of Sh47 billion in tax revenue over the five years.
The study by Kantar Insights East Africa, a market research firm, shows that 95 percent of illicit cigarettes entering Kenya originate in Uganda. The remaining five percent comes from South Sudan and Somalia.
The report identifies lower excise duties in the three countries as a major incentive for smuggling into Kenya.
Uganda charges Sh39 in excise duty on a pack of 20 cigarettes, compared with Kenya’s Sh89, the study shows. South Sudan has an even lower rate at 24 percent.
The tax gap between Kampala and Nairobi has created an incentive for smugglers to move cigarettes into Kenya, where higher excise duties make legally sold products more expensive.
Many cigarettes shipped from Uganda are declared as destined for South Sudan or Somalia but are later diverted into Kenya, where they are sold more cheaply than duty-paid products.
The study, commissioned by Nairobi Securities Exchange-listed BAT Kenya, found that illicit cigarettes accounted for 45.1 percent of Kenya’s market in 2025.
The findings underline the growing pressure that untaxed imports are placing on legitimate cigarette manufacturers.
The illegal trade deprived the government of Sh47 billion in tax revenue over the five years to 2025, according to the study.
Tax revenue lost to illicit cigarettes reached Sh10.2 billion in 2025, a 50 percent increase from Sh6.8 billion in 2020, the report says.
Meanwhile, excise duty collections from cigarettes fell sharply, dropping by 17 percent, or Sh1.97 billion, between 2024 and 2025.
Data from the Kenya National Bureau of Statistics shows that the Kenya Revenue Authority collected Sh9.56 billion in cigarette excise duty in 2025, down from Sh11.53 billion in 2024.
The report calls for stronger border surveillance, tighter enforcement, a comprehensive track-and-trace system for tobacco products, closer monitoring of informal distribution networks and greater regional cooperation against smuggling.
It also recommends reviewing excise duty policy to narrow the price gap between legal and illicit cigarettes.
The survey was conducted in February and March 2025 across Western, Rift Valley, Nyanza, Eastern, Coast, Central and Nairobi regions. Respondents were adult smokers aged between 18 and 64 years.
