The Effects of Dollarization on Local Currency in Somalia

Abstract

This study focused on the effects of dollarization on local currency (Somali Shilling) in Somalia. The study employed quantitative research method. The study adopted descriptive research design to assess the effects of dollarization on local currency in Somalia. The researcher collected the data through documentary review of several articles, books and journals in relation to the effects of dollarization on local currency in Somalia. The key findings the effects of dollarization on local currency in Somalia encompass: dollarization leads to local currency depreciation and shortages in Somalia, dollarization increases the rate of foreign exchange on local currency and inflation rate and dollarization weakens the local financial institutions, which creates lack of financial control in the economy by the government authority leading to financial instability. The study recommended that, the Central Bank of Somalia, and Parliament of the Federal Republic of Somalia should introduce new regulation to regulate finance in the economy, new policy on financial control, introduce financial reform and review business models in the sphere of finance in Somalia to curb the increasing devastating effects of dollarization on local currency in Somalia.