Dollars for Donuts in Monrovia, Liberia

By Leigh A. Gardner and Ellen Feingold

If you were to buy a donut and cup of coffee at the Donut Bar in the Royal Grand Hotel in Monrovia, Liberia, you would more than likely pay using U.S. dollars. Your change, however, would include a mix of U.S. dollars and Liberian dollars, with the latter holding a lower value and thus serving as small change in place of coins. Why do U.S. dollars circulate in Liberia? And how did this dual currency system emerge?

A 100-dollar note.
100-dollar note, Liberia, 2011, donated by Leigh Gardner

A dual currency system has existed in Liberia since the late 1800s. It can be a source of great hardship for Liberians, who might be paid in Liberian dollars but need to purchase imported food or other goods in U.S. dollars. This is particularly true when the value of the Liberian dollar falls relative to the U.S. dollar, as it has in recent years.

The Liberian dollar was created when Liberia declared independence in 1847. One of the first acts of the Liberian government was to establish its own currency—in the words of Joseph Roberts, the first president of Liberia, “to mark the existence and the nationality of the Republic.”

The front and back of a bronze coin.
One-cent pattern coin, Republic of Liberia, 1862, donated by Paul A. Straub

The first Liberian coins tell the history of the Liberian state. One side features the image of a palm tree with a sailing ship, representing the two key sources of Liberian wealth: trade and palm oil. The other side depicts an allegorical female figure wearing what is known as a Phrygian cap or freedom cap, associated in classical imagery with formerly enslaved people.

Such a reference was particularly relevant in Liberia, which was founded in 1822 as a colony for freed African-Americans from the United States. Between 1820 and 1904, some 16,000 African-Americans migrated to Liberia. When they arrived, they found multiple currencies circulating in the region, the most important of which was the iron Kissi penny, pictured below.

A metal rod.
Kissi penny, Liberia, 19th and 20th centuries, donated by The Chase Manhattan Bank

The American Colonization Society and its subsidiary societies, which organized the migration, also issued their own coins and notes that migrants could use at company stores for the purchase of supplies. The Liberian dollar was intended to replace these when Liberia declared itself an independent state.

A note with a rooster on it.
10-cent note, Maryland State Colonization Society 1837, donated by The Chase Manhattan 

When the Liberian dollar was issued in 1847, it had to compete not only with indigenous currencies like the Kissi penny, but also with European currencies like British pounds, shillings, and pence. The Liberian government struggled with debt throughout its early history, and one quick source of revenue was to print paper notes like this one from 1880.

A bank note.
25-cent note, Republic of Liberia, 1880, donated by the Department of the Treasury

While printing money provided a short-term solution to the Liberian government’s financial difficulties, it had a long-term cost. Much like today, the Liberian dollar began to lose its value against these other currencies. This made imported goods, for example, much more expensive. For the Liberian government, it also increased the cost of paying interest on its foreign debt. As a result, merchants and then the government began to use the colonial currency of British West Africa instead.

A silver coin.
One penny coin, British West Africa, 1936, donated by Paul A. Straub

This became Liberia’s main form of currency until 1943, though the Liberian dollar still circulated as small change, such as this two-cent coin from 1941.

A coin with an elephant on it.
Two-cent coin, Liberia, 1941, donated by The Chase Manhattan Bank

Despite its use of British West African currency, Liberia’s economic relationships with the United States grew closer during the 1900s. From 1912, the Liberian government’s debt was in U.S. dollars, while tax revenue was collected in British West African currency. When the value of the pound declined relative to the dollar during the 1930s, it became more difficult for the government to pay the interest on its debts. Finally, in 1943, with financial help from the U.S. government, the U.S. dollar replaced British West African shillings as the primary currency in circulation.  

The Liberian government has tried over the years to return to a single currency system based on the Liberian dollar, however many people still use U.S. dollars for everyday transactions. Around the world, the U.S. dollar is frequently used by people who want to use a more stable currency for transactions, even if it isn’t their national currency. The story of the dollar in Liberia shows that this is nothing new. As the saying goes, it is dollars to donuts that once a country adopts a foreign currency, it will have difficulty reversing the decision.

This story of the role of the U.S. dollar in Liberia is now featured in the New Acquisitions case in The Value of Money exhibition.

Leigh A. Gardner is an associate professor of Economic History at the London School of Economics. Ellen Feingold is the curator of the National Numismatic collection.

The Value of Money is made possible through leadership support from Bill Gale, Lilly Endowment Inc., Lee and Saundra Minshull, an anonymous donor, and contributions from many others in the numismatic community.