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Kenyan Coins Vanish Due to Inflation
By Richard Giedroyc, World Coin News
September 20, 2010

This article was originally printed in Numismatic News.
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Building on the proverbial question of which came first, the chicken or the egg, Kenya’s current coinage shortage is in part caused by inflation, and in turn appears to be causing yet additional inflation.

This is the second time within two years the African nation has experienced hoarding by the general public due to the fear of inflation, each time in turn forcing prices up yet further because merchants unable to make change round up prices.

According to an article appearing in the Aug. 2 issue of The East African newspaper, “The problem [coin shortage] has forced some businesses to increase the price of essential household items such as tomatoes, kales, onion, and match boxes as a solution to the coins shortage. The prices of the essential commodities are expected to continue increasing, a trend that will continue eroding the value of lower [coin] denominations, with the potential of pushing up the inflation rate.”

Inflation was recently suggested to be at about 5.85 percent as compared to 26.3 percent one year earlier. If what has been reported regarding the lack of coins in circulation holds true, this inflation rate can be anticipated to rebound.

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The East African quoted Nairobi kiosk merchant Michael Njuguna as saying, “This shortfall has made us lose out on a lot of business. A customer seeking to buy a packet of chewing gum worth 2.50 shilling (about 3 cents US) will have to buy two, otherwise I would lose due to lack of change.”

The three well-known retail chains in Kenya, the Nakumatt supermarkets, Tuskys, and Uchumi, have recently reported offering sweets rather than coins to customers to make change. Newspaper kiosks anticipate being impacted, with the cost of a daily newspaper being 35 shillings or about 43 cents US.

Using the newspaper price as an example, merchants may be forced to sell the newspaper for either 30 shilling (about 37 cents US) or 40 shilling (about 50 cents US) due to a lack of the ability to make change. The newspaper article reported a shortage of 5-shilling coins being the problem.



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