- Several countries worldwide rely on foreign currencies like the US dollar or euro instead of issuing their own money
- The reasons behind these arrangements range from economic crises to close ties with neighbouring economies
- While the approach offers monetary stability, it also strips these countries of control over their own financial policy
Legit.ng journalist Adekunle Dada has over 8 years of experience covering metro, government policy, and international issues
Several countries around the world have chosen to forgo their own national currencies, instead relying on the money of larger or more stable economies to manage everyday financial life.
The reasons for such arrangements vary widely. Some countries abandoned their own currency after severe financial crises, while others did so to deepen trade ties or to benefit from monetary stability they could not achieve on their own.
Source: Getty Images
According to Vanguard, the trade-off, however, is a loss of independent monetary policy.
Countries using US dollar
El Salvador replaced its former currency, the colón, with the US dollar in 2001. The government made the switch to bring down inflation, attract foreign investment, and make trade and remittances more straightforward.
The downside is that the country cannot independently adjust interest rates or respond to local economic pressures through its own central bank.
Ecuador followed a similar path in 2000, after a financial crisis sent the value of its currency, the sucre, into a sharp decline.
Dollarisation helped restore public confidence in the economy and brought greater price stability, though the country gave up the ability to issue money or set its own monetary policy in the process.
European countries using foreign currencies
Kosovo uses the euro as its official currency even though it is not a member of the European Union or the eurozone.
The country turned to the euro after years of monetary instability and continued using it after declaring independence from Serbia in 2008.
While the euro has helped smooth trade and financial dealings with European neighbours, Kosovo has no seat at the European Central Bank and no say in eurozone monetary decisions.
Montenegro is in a similar position. The country began using the euro in 2002, after a transitional period during which it used the German mark alongside the Yugoslav dinar.
The euro has simplified transactions with European markets and provided a stable monetary environment, but Montenegro cannot issue its own currency or set interest rates independently.
Liechtenstein, a small principality in central Europe, uses the Swiss franc rather than the euro.
Its close economic relationship with Switzerland makes the arrangement practical, giving the country access to one of the world’s most stable currencies without the need to maintain its own.
The limitation is that Liechtenstein has little influence over decisions made by the Swiss National Bank.
Source: AFP
Nigerian naira gains against dollar
Recall that the naira gained against the dollar at the official market on Thursday, August 13, as the CBN removed key restrictions on banks.
Nigeria’s external reserves climbed to $52.19 billion as of August 12, 2026, their highest level in 17 years.
Analysts said the CBN’s rule changes could deepen activity in the money and fixed-income markets.
Naira falls against dollar, pound and euro
Meanwhile, Legit.ng also reported that the naira weakened against the US dollar, British pound sterling, and euro in the official foreign exchange market on Tuesday, July 28
Interbank FX turnover surged by 160% to over $102 million, with the number of deals rising sharply from 55 to 121.
Nigeria’s external reserves came under pressure following CBN interventions in the currency market the previous week.
Source: Legit.ng