The shilling is battered by the major world currencies. Kenyans are crying as the cost of goods and services rise to unprecedented levels and although MPs have not yet constituted a special committee to rein in the shilling, like they did a decade ago, the future looks bleak.
The first time the Kenyan currency was in this kind of trouble more than a century ago, it was because of its strength. Ironically, trouble at the time arose because the shilling was stronger than the British Pound. The echoes of the battle of the shilling against the pound ricocheted in Nairobi, reverberated in London, Bombay, and Calcutta, and touched off a revolution that almost toppled the colonial administration.
The war of the currencies started soon after the end of the Great War, variously referred to as the First World War, in 1919. At the time, the East Africa Protectorate was using the Indian Rupee which at the time had a value of one shilling and four pence, which translated to 15 rupees to £1.
However, after the war, there was a rise in the price of silver, the mineral which was used to make the rupee, consequently making its coins to be costly. This affected the value of coffee and sisal exports to an extent that Governor Edward Northey tried to intervene. The governor was also worried that the fall of the pound against the shilling and the rupee would reduce the value of capital that the ex-soldiers who had fought in the World War had been given to settle in Kenya.
The settlers, led by Ewart Grogan and Lord Delamere were demanding that the exchange rate of the pound to the rupee be devalued and divorced from the Indian currency. The governor backed them and insisted that the banks had to save the settlers from an imminent 12 per cent loss on the capital being brought by the demobilised soldiers.
Threats and ultimatums were issued to banks by the government resulting in scenario which almost brought the economy to its knees. The banks, in retaliation, told the government if it persisted in its demands they too would call up all loans, cancel overdrafts and withhold further credit to the settlers.
In the meantime, the colonial office in London was firing off angry memos to Nairobi as it desperately tried to forestall the looming financial meltdown which at one point saw the government ban importation of rice.
The stalemate was contained a year later after a new currency, known as the florin was introduced in the three East African British colonies, eradicating the powerful rupee which had strongly rallied against the pound sterling, causing ruin and anxiety among settlers.