25 Cents – Eritrea

In 1997, Eritrea was in the early stages of establishing its monetary sovereignty following independence from Ethiopia in 1993. The country was still using the Ethiopian birr as its de facto currency, a situation formalized by a 1993 monetary agreement. This arrangement was inherently transitional, as Eritrea sought the economic autonomy befitting a sovereign nation. However, the use of the birr created significant vulnerabilities, as monetary policy was controlled by the National Bank of Ethiopia, leaving Eritrea with no direct control over its money supply, interest rates, or ability to address foreign exchange shortages.

Tensions over this monetary union were a major point of contention between Asmara and Addis Ababa throughout the mid-1990s. Disagreements centered on the allocation of foreign exchange earnings and the perceived constraints on Eritrea's growing economy. By 1997, these frictions had escalated, prompting the Eritrean government to announce the introduction of a new national currency, the nakfa, named after the town that was a symbol of the independence struggle. The announcement was a decisive step toward full economic independence but was made without a formal agreement with Ethiopia on the conversion process for the birr in circulation within Eritrea.

Consequently, the currency situation in 1997 was one of tense anticipation and preparation for a profound monetary divorce. The stage was set for the nakfa's eventual introduction in November 1997, which Ethiopia would reject as illegitimate, refusing to convert birr holdings from Eritrea. This financial dispute became a critical catalyst, exacerbating existing border tensions and contributing directly to the outbreak of the devastating Eritrean-Ethiopian War in May 1998. Thus, in 1997, the currency issue evolved from a technical economic challenge into a core national sovereignty dispute with imminent and grave consequences.