The National Bank of Somalia or the Banca Nationale Somalo first opened for business on July 1st, 1960. It was the day of the completion of the unification of Ex-British Somaliland and the Ex-Italian-administered UN Trust territory of Somalia.
The bank was created simply through a change of name from its pre-independence name of the Cassa per la Cirolazione Monetaria Della Somalia. It had only one office in Mogadishu but expanded over the years and by 1965, it had nine branches across the country and operated both as a commercial bank and as the central bank of the country. The country then, was informally divided and known to consist of two regions, namely the North referring to Ex-British Somaliland and the South referring the Ex-Italian administered UN Trust Territory of Somalia. The National Bank of Somalia again changed name on February 8th, 1975, to become the Central Bank of Somalia (“CBS”), which it still retains.
The currency circulating in the north at the time of independence was the East African Shilling, while in the South the Scelleni Somalo was circulating and in order to rationalize and unify the currency issues of the two regions, a number of measures were taken. Through a Monetary Ordinance of March 1961 and confirmed by a Presidential Decree Number 93 of April 10th, 1961, the currency of the country was established as the Somali Shilling. Through another Presidential Decree No 113 of 15th, March 1961, the East African Shilling, which was still circulating in the North of the country lost its legal tender and ever since the currency of the country remains to be the Somali Shilling (Refer to: The Banknotes of Somalia – Part 2, Peter Symes, December 2005).
However, since the collapse of the country’s government in 1991, the Central Bank of Somalia was a non-functional institution until 2009 when it was resuscitated. However, the currency of the country remains to be the Somali Shilling but carries a much-depreciated value against the United States Dollar. It is printed illegally by both companies and individuals in differing denominations and is, therefore, money-laundering at its supreme, despite the re-establishment and functionality of the Central Bank of Somalia, which simply remains a treasury box for the Federal Administration of the country. It does not have branches across the five member states of South Somalia and the North has declared itself long ago as Somaliland and independent from the South. It even prints its own national currency, the Somaliland Shilling.
Puntland, a member state of the Federation, in the South, continually threatens to print its own currency. The latest such threat was on 21st December last year 2024, when its president “unveiled plans for launching a separate currency for Puntland” according to Puntland Post, an online news carrier from the region.
The Somali economy is dollarized, and most transactions, including buying a cup of coffee from a small coffee shop, is paid in United States Dollars. Perhaps, it would not be a bad idea to accept officially the United States Dollar as the currency of the country, putting aside the fake nationalism of Somalis. They are all loyal to their clans than their country, a strange phenomenon which has been sweeping the country over the past three to four decades. They should also, perhaps, print their currencies as Somaliland has done and Puntland is threatening. Maybe all the others should also print their own currencies, and the country would then be balkanized into mini-states, where the rule of law and power would be in the hands of a few clan-insured characters, who would never go away, like the sheikhdoms of Arabia.
Somalia has been operating without a central bank and without a monetary authority over these past decades. How long this would continue is anybody’s guess. The federal government has been talking about issuing new notes for the Somali Shilling since 2012, but personal enrichment and personal agendas insured through clan protection seems to be the main focus of the corrupt political class of the country.
The endless talk of reviving the Somali Shilling has been a discussion involving even the World Bank and the IMF, two institutions which were involved in Somalia’s finances over the past twelve years. But the US Dollar remains the main currency of transactions and even deposits with the thirteen officially licensed banks in the country are made in United States Dollars. The country’s electronic money wallets also carry deposits in United States Dollars. Somaliland is the only part, which enforces the usage of its printed Somaliland Shillings and transactions below US$ 100 are carried out in Somaliland Shillings in the regions which it controls.
The main obstacle to the revival of the country’s currency, the Somali Shilling, however, remains to be the unstable and unfinished political business of the country. The corrupt political class appears to be busy enriching themselves while they can and seem to have no time for setting up the frameworks and the necessary environment for the issuance of new notes of the Somali Shilling.
It will be years or a change of the political class of the country, both ruling and opposition, if Somalia has any chance of revisiting the issue of its currency. The current political class is based on the clan-sharing of powers where every clan has thrown up its worst to face off the other clans and this has been the demons, which the Somali societies across the globe, have been unable to address so far. This does not mean they cannot. The silent majority of the population does include good people who have the best interest of their country at heart and not the devilish side of clan infrastructure of the country.
It is where a technocratic administration, managing the country for some years (three to four) is needed to create the country’s institutions including a viable and strong central bank and a monetary authority, which can handle not only setting an exchange rate for the Shilling against other currencies and manage the country’s money supply. At present, no one know how much money, is in the country as a large part of the population of the country do not even deal with the existing banking institutions. They keep their monies outside the formal systems, in safes and boxes at home or elsewhere.
When the issuance of new notes occur in the future, a major issue that will be confronted will involve how to verify what someone claims to be his money and exchange it for the new Shillings. Much of the current circulating Shilling supply were printed by unscrupulous individuals and/or member states. It is strange that Somalis still deal in a currency they know was printed by someone to enrich oneself.