Illicit cigarette trade now nearly half of Kenya’s market, says BAT

Recent data from BAT Kenya’s full‑year 2025 results, released in late February 2026, show a sharp rise in the prevalence of illicit cigarettes in Kenya. The tobacco company says that illegal cigarette consumption now accounts for 45 per cent of the country’s entire cigarette market. This figure rises from 37 per cent in 2024, based on third‑party research cited by BAT.

The company’s Managing Director, Crispin Achola, described the situation as a growing threat to both industry and government finances.

“In Kenya, the domestic market continues to be adversely impacted by illicit trade,” Achola said. “Illicit cigarette prevalence now represents 45% of the domestic market, a drastic increase from 37% in 2024 (according to third‑party research). This illicit activity not only undermines industry revenues but also deprives Government of an estimated KShs 12 billion annually.”

BAT Kenya is the dominant player in the legal cigarette sector. Because of this, the company explains its own volume pressures and falling legal sales largely through this rising illicit market share.Despite these challenges, BAT Kenya showed resilience.

• Net revenue declined by 10 per cent, driven primarily by heightened illicit trade in the domestic market, partially offset by new revenue from oral nicotine pouch sales.
• Total cost of operations decreased by 15 per cent, reflecting lower sales volumes, the benefit of effective cost management and productivity initiatives implemented during the period.
• Finance income of Ksh0.2 billion was earned, a significant improvement from the prior period, driven by Kenyan Shilling stability against the US Dollar exchange rate and prudent cash management.
• Profit before tax increased by 18 per cent to Ksh7.7 billion driven by a 2 per cent improvement in operating profit and lower finance costs.
• Closing cash at the end of the year increased by 15 per cent to Ksh 6.2 billion reflecting prudent cash management throughout the year.

Drivers of illicit surge

Industry experts point to several factors driving the rise. A major issue is the difference in excise taxes between Kenya and neighbouring countries, especially Uganda. Cigarettes that are cheaper to produce and sell across borders make their way into Kenya, reducing the competitiveness of taxed legal products. This cross‑border price gap makes it easier for illegal traders to supply the Kenyan market.

Achola also highlighted the loss of tax revenue for the government.

“This illicit activity… deprives Government of an estimated Ksh12 billion annually,” he said.

The figure refers to taxes that would otherwise be collected if those cigarettes were sold through legal, regulated channels.

Comparisons have been drawn with countries such as South Africa, where illicit tobacco trade has reached much higher levels. BAT warns that without better enforcement and coordinated action, Kenya may face similar challenges.

The company calls for stronger cooperation among authorities, including customs, law enforcement and regulators, to tackle smuggling and counterfeit production. BAT says that legal firms are at a disadvantage when illegal sellers evade taxes and compliance costs.

Similar crisis in alcohol market

Kenya faces a parallel problem with illicit alcohol, where unregulated and illegal drinks now dominate sales. A Euromonitor International report commissioned by the Alcoholic Beverages Association of Kenya (ABAK) found that 60 per cent of all alcohol sold in the country is illicit.

This marks a 27 per cent rise in unregulated consumption since 2022. High taxes on legal products have driven consumers toward cheaper homemade brews like chang’aa and busaa, as well as smuggled and counterfeit spirits.

Much of the illicit supply comes from cross-border smuggling. The government lost an estimated Ksh120 billion in tax revenue last year due to this leakage, smuggling, and fake brands.

Beverly Opora, Secretary of Administration at the Ministry of Interior, noted the severe impacts:

“The rise we all know has negatively impacted on our nation resulting in health challenges as well as deaths and this has affected a very critical population of our nation, the youth.”

Eric Githua, Chairperson of ABAK, said:

“Illicits make this country unable to attract further investments because of the level of illicits that we have. Illicits also reduce the revenues for our great republic because as you can appreciate the alcohol industry is a significant player in our country.”