I'm pretty sure it is a blunt. If you play the missions, you can totally tell that they're smoking blunts. You can tell by the way they inhale, and how they offer it to CJ (of course CJ refuses, saying he's not into that shit). They also make tons of references to it in their dialogue. They never say the word, but you know that they're talking about weed.

Even the pedestrians talk about weed a lot, and a lot of them (especially CJ's gang members) just stand there smoking blunts. Some of the pedestrians are smoking blunts in their cars too. One of them said "Hey, do you lift weights? Cause I lift joints." And another guy in the convenience store said (after I bumped into him), "Can't you see I'm busy being high?"

The weed references are everywhere in this game. It's so awesome. In VC the drug was cocaine, and in SA it's weed. I love it.