By Dr. Osman Sayid Hassan Musse - dean of the Faculty of Management Sciences, SIMAD University, Mogadishu.
“Restoring the Somali shilling is ultimately a credibility exercise, not merely a printing exercise.” Dr. Osman Sayid Hassan Musse
The disappearance of the Somali shilling from everyday commerce is not merely a currency story; it reflects institutional collapse, dollarization, technological change and a long erosion of public trust.
From National Symbol to Marginal Currency#
The Somali shilling (SOS), introduced in July 1960 after independence, is more than a unit of payment—it is a symbol of national sovereignty. Over the following decades, Somalia issued banknotes in denominations of 5, 10, 20, 50, 100, 500 and 1,000 shillings, along with 5-, 10- and 50-cent coins.
By April 2026, however, the 1,000-shilling note—the only denomination still in circulation—was being rejected by traders in Mogadishu and across South and Central Somalia, the currency’s last stronghold.
The decline began long before 1991, as Figure 1 indicates. During the 1970s and early 1980s, drought, weak agricultural and livestock production, regional conflict, rising public expenditure, deficit financing, rapid credit growth, inflation, balance-of-payments problems and declining foreign-exchange reserves placed heavy pressure on the currency. The authorities responded with major devaluations in 1981 and 1982 and later moved toward a managed exchange-rate arrangement.
1991: The Collapse of Monetary Control
The collapse of the Somali state in 1991 transformed a weakening currency into an institutional crisis. The Central Bank of Somalia (CBS), like other state institutions, ceased to perform its normal central-banking and monetary-policy functions, while the formal financial system fragmented.
As purchasing power eroded, all coins and most banknote denominations gradually disappeared from circulation. The only remaining widely used note, the 1,000-SOS bill, became extremely old—torn, faded and often held together with tape, glue or stitching—while counterfeit and unauthorized notes proliferated.
These conditions steadily weakened confidence in the shilling. Large bundles of notes were needed for modest purchases, making cash transactions increasingly inconvenient.
Meanwhile, the U.S. dollar increasingly took over the functions of unit of account, store of value and medium of exchange. Hawala and money-transfer companies, diaspora remittances, international aid, export receipts and external trade reinforced dollarization. As the formal financial sector gradually re-emerged, commercial banks also came to operate largely in U.S. dollars.
Digital Payments Accelerated Dollarization#
For many years, the shilling survived because it retained one practical role: settling small daily payments. Digital payments weakened even that advantage.
Mobile-money platforms such as EVC Plus and E-Dahab, e-wallets such as Premier Wallet, and instant online transfers made it possible to send, receive and spend very small amounts in U.S. dollars. Groceries, transport, airtime and person-to-person payments could increasingly be settled digitally in fractions of a dollar.
The result was significant: technology removed one of the remaining practical reasons for using the shilling. Dollarization was no longer confined to large purchases, savings, trade and banking; it increasingly reached the smallest everyday transactions.
The Human and Economic Cost of a Rejected Currency#
The April 2026 rejection of the 1,000-shilling note did not affect everyone equally. Although most transactions were already conducted through U.S. dollar-based digital platforms, rural households, internally displaced people, small traders and money exchangers who still relied on shilling cash were more exposed.
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The impact was compounded by the absence of an official exchange mechanism. Because the Central Bank of Somalia had not issued a new national currency since 1991, there was no established system for redeeming genuine old notes.
Once the 1,000-shilling note lost acceptance, these remaining cash holdings became increasingly difficult to use or convert, intensifying the human and economic cost.
Restoring the Shilling: Credibility Before Compulsion#
Somalia should restore its national currency gradually rather than attempt to displace the U.S. dollar overnight. The priority is to rebuild confidence through rules-based reform that strengthens the CBS, protects the public and makes the shilling worth holding and using again.
A currency board arrangement could provide a credible transitional framework by linking new shilling issuance to adequate foreign-reserve backing and a fixed conversion rule. This would constrain discretionary money creation but would require fiscal discipline, sufficient reserves, strong banking supervision and clear legal rules.
Reform should begin with a transparent, time-bound exchange of genuine old shillings, including legitimate 1,000-SOS notes, under clearly announced conversion rules.
The IMF’s currency-reform roadmap remains relevant. Its first phase proposed new 1,000-, 2,000-, 5,000- and 10,000-shilling notes, supported by anti-counterfeiting measures, secure distribution, accounting controls, independent auditing and cooperation with financial institutions and law-enforcement agencies.
The principle is clear: secure and replace the currency first, then expand issuance as institutional capacity and reserve management strengthen.
The new shilling should also be digital from the outset. Banks and mobile-money providers should offer SOS-denominated accounts, wallets, transfers and merchant-payment services alongside dollar services. This is essential if a restored national currency is to compete in an economy where digital payments have become embedded in everyday life.
Once stability and convertibility are established, the government can gradually expand demand for the shilling through selected taxes, fees, salaries, social transfers and domestic procurement. Banks can also develop SOS-denominated deposits and Sharia-compliant financing products.
Restoring the Somali shilling is ultimately a credibility exercise, not merely a printing exercise. Somalia cannot restore monetary sovereignty simply by putting new banknotes into circulation. It must persuade households, businesses and financial institutions that the currency will retain its value and remain readily convertible and convenient to use.
If the shilling is stable, secure, convertible and accessible in both physical and digital form, it can gradually regain a meaningful role alongside the U.S. dollar. In doing so, Somalia would not only restore a national symbol but also rebuild an important pillar of economic sovereignty.
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Dr. Osman Sayid Hassan Musse is the dean of the Faculty of Management Sciences, SIMAD University, Mogadishu.
The views expressed in this article are those of the author and do not necessarily reflect the editorial position of Dawan Africa.