Off the Island
Minutes after the murder of Howard Zukerman, while looking for his diamonds hidden inside his matryoshka doll, Paulo pulled out a cigarette and intended to light it. Nikki quickly stopped him, claiming they did not want to leave evidence.
Four days later, while waiting to board Oceanic Flight 815, Nikki noticed Paulo was chewing gum. He explained that he started using nicotine gum, as he decided to quit smoking. This led to a toast the two had for their new life together.
Paulo's nicotine gum was inside his bag, along with Zukerman's diamonds, and went missing after the crash.
On the Island
Searching for the nicotine gum was Nikki's cover for trying to find the diamonds. Meanwhile, Paulo found his missing bag at the bottom of a waterfall, and hid the diamonds in the Pearl, in fear of losing Nikki's affection once the diamonds were found. Claiming the bag was gone, Paulo kept chewing the gum without Nikki noticing.
While sitting on the beach, Paulo mistakenly left the nicotine gum in the sand. When Nikki saw this, she realized that he had the diamonds, fueling her revengeful plan to use the Medusa spider shown to her by Leslie Arzt to paralyze Paulo.