Uganda supplies about 95 percent of the illicit cigarettes entering Kenya, according to a Kantar study. The gap is driven by excise duty: Kenya charges Sh4,100 per 1,000 cigarettes, while Uganda charges Sh1,974. The illicit trade cost Kenya an estimated Sh10.2 billion a year in excise and VAT, according to a BAT Kenya study released in November.
The Kantar research, commissioned by British American Tobacco (BAT) Kenya, finds that 95 percent of illicit cigarettes entering Kenya originate in Uganda. The remaining 5 percent comes from South Sudan and Somalia. The study is yet to give a clearer breakdown of where the contraband comes from.
The tax gap explains the pull. Kenya charges Sh4,100 in excise duty per 1,000 cigarettes, or Sh82 for a pack of 20. Uganda charges Sh1,974, Tanzania Sh1,874 and South Sudan Sh1,200 per 1,000 cigarettes. At those rates, a smuggler buying in Uganda and selling in Kenya can undercut legal packs substantially and still make a profit.
The market shift has been steep. The BAT-commissioned study found that illicit cigarettes accounted for 45 percent of the Kenyan market in 2025, leaving legally taxed products with 55 percent. BAT Kenya’s managing director, Sidney Wafula, said the share of legal cigarettes had fallen 11 percentage points between 2021 and 2025, from 66 percent. Another BAT estimate in March put illicit consumption at 47 percent at the end of 2025, up from 37 percent in 2024.
The revenue loss is significant. BAT estimates that Kenya loses about Sh10.2 billion a year in excise and value-added tax to the trade, with nearly one in two cigarettes consumed in the country escaping taxation. Wafula linked the problem to excise increases between 2018 and 2022, which raised the tax burden by 55 percent and coincided with falling legal volumes and government collections.
Geography helps the smugglers. Western Kenya’s porous borders have made the region a hub for contraband and Lake Victoria islands have been identified as points for moving illicit goods. The manufacturer Mastermind, whose flagship brand is Supermatch, has said its brand is being smuggled into Kenya from Uganda and that counterfeit products have taken a large share of its market.
Enforcement has produced some cases but has not closed the gap. KRA investigators uncovered a concealment and smuggling scheme along the Kenya and South Sudan border in December 2025. Earlier, a 2022 case involving Sh762 million in smuggled cigarettes led to a labour court ruling over the dismissal of a KRA officer.
The policy dilemma is real. The government needs excise revenue, but BAT argues that further increases would widen the price gap between legal and illegal products and worsen the problem. Kantar has recommended excise harmonisation within the East African Community to reduce the price differences that drive smuggling.
The next signals will be whether the Treasury considers excise changes in its next budget cycle, whether EAC partners discuss harmonising duty rates, and whether KRA’s enforcement produces sustained seizures. Those steps will determine whether Kenya’s cigarette tax base can recover.
