The nakfa is pegged to the US dollar at a fixed rate of USD$1 = ERN15. At earlier times,[when?] it was officially pegged at USD$1 = ERN13.50. The currency is not fully convertible, so black market rates available on the streets typically offered a rate of 32 nakfas per dollar.[needs update]
Between 18 November and 31 December 2015, the Bank of Eritrea began replacement of all nakfa banknotes. The banknote replacement initiative was designed to combat counterfeiting, the informal economy but primarily Sudanese human traffickers who had accepted payments in nakfa banknotes in exchange for transporting would-be migrants primarily to Europe. A consequence of this was substantial amounts of the country's currency existed in vast hoardings outside of Eritrea.
The plan to replace the country's currency was top secret and designed to prevent human traffickers bringing their funds back in time to exchange for the new banknotes. On 1 January 2016 the old nakfa banknotes ceased being recognized as legal tender, rendering external stockpiles of currency worthless.
The current series of banknotes is the artwork of an Afro-American banknote designer, Clarence Holbert, and printed by German currency printer Giesecke & Devrient.
Nakfa coins are made entirely of Nickel clad Steel. Each coin has a different reeded edge, instead of consistent reeding for all denominations. The 1 nakfa coin carries the denomination "100 cents".
There have been five series of banknotes since the currency's launch. The first issue for all denominations was dated 24.5.1997; the second issue consists of only the 50- and 100-nakfa notes and is dated 24.5.2004; the third issues also consists of only the 50- and 100-nakfa notes and was dated 24.5.2011, and the fourth issues consisted of only the 10- and 20-nakfa notes and was dated 24.5.2012. (May 24 is Eritrea's Independence Day). The current fifth banknote series which rendered all previous currency valueless is dated 24.5.2015.
Banknotes of the Eritrean nakfa (1997-present series)
Eritrea's government has resisted calls to float the nation's currency, preferring the stability of a fixed exchange rate. However periodic devaluations have been made. ERN is a very weak currency. The de facto exchange rate of the currency is around 100 ERN for 1 USD.The currency does not have a good demand outside Eritrea. The black markets that exist in Asmara and a few other towns show the diminishing values of ERN.