As US troops withdrew from Somalia in the spring of 1994, a teenaged Muse Omar Jama began working as an exchange trader in Mogadishu’s Bakara market. More than three decades later, he still does the same job, but wonders for how much longer.

Jama, 49, sits in a plastic chair in the one-room office he shares with other traders. The auto-rickshaws speed by outside, but inside is quiet; the noise of bargaining has faded and the traders exchange few words between themselves.

Their battered metal safes, filled with millions of Somali shillings, are closed and locked. The paper fortunes inside have suddenly become worthless. “It’s like we went bankrupt overnight,” says Jama.

Last month, fed up with greasy, ripped and aged banknotes, a handful of traders in Mogadishu decided they would no longer accept them. Soon businesses, shops and even bus drivers were following suit, and the decision quickly spread to regions outside the capital.

The impact on prices was immediate, pushing up everyday expenses such as groceries, medicines and public transport. A small bag of powdered milk, for example, more than doubled in price.

Amid global food price rises and Somalia’s ongoing drought, poor people are bearing the brunt of the effects of an economy that is becoming completely “dollarised”.

Somalia is one of the most remittance-dependent countries in the world. The diaspora sends billions annually – primarily in US dollars. These remittances flow into the economy via informal money-transfer operators, known as hawala in Arabic. The heavy presence of international bodies in Somalia – such as the UN, aid organisations, foreign forces and security firms – has further reinforced the use of US dollars.

Somalia has not printed any banknotes since 1991, when the then government of Siad Barre was overthrown, the central bank ceased to operate, and the country gained the infamous title of “failed state”. In the following years, the 1,000 Somali shilling note, the highest-value bill, became the only officially recognised money in circulation.

In the absence of an agreed unified currency amid factional conflict and politics – the breakaway territory of Somaliland launched its own shilling – the US dollar and phone transfers have become increasingly commonplace. Soon the only regions that accepted shillings were Mogadishu and some towns and districts in the country’s south.

Before last month’s revolt from businesses, people from all walks of life would come to Jama’s office at Zoobe junction to exchange their shillings for dollars via mobile money, or vice versa, cashing in mobile remittances for Somali shillings.

Now, just like hundreds of thousands of others who are not paid in dollars through banks, Jama’s life has been turned upside down.

“Prior to the rejection of the Somali shilling, I was able to make enough to cover the basics such as rent, electricity and water,” says Jama. He now walks the three miles (5km) to work because he cannot use shillings on the bus.

“The rejection of the Somali shillings has hurt poor people the most, even the beggars. They used to be given a couple of thousand Somali shillings by passersby and for them, it was a form of survival that helped them purchase food and small goods but now the notes they have are worthless,” Jama says.

“When they come to me trying to exchange their Somali shillings for mobile money in dollars, I have to turn them away because my safes, shelves and tables are already full of Somali shillings that I’m unable to exchange for US dollars anywhere.”

On 4 May, dozens of exchange traders staged a protest, waving wads of the old banknotes as they walked through the streets of Mogadishu, shouting: “Somalia is the only country without a currency.” Jama was too disillusioned to join them. “It doesn’t seem like things will ever be the same again. Our currency is dead and so is our way of life.”

Asha Ali Ahmed, 39, who sells vegetables at what used to be her mother’s market stall in Mogadishu, has similar concerns. “We were raised off the earnings from this vegetable stand,” she says. “I would take the Somali shillings to [the farming town] Afgoye to buy vegetables, then return to Mogadishu and sell them in the market.”

Now farmers refuse to accept the shillings and request payments in mobile money instead, increasing vegetable prices. “Vegetables were already expensive because of the drought,” she says. “The rejection of the shilling only exacerbated our situation.”

Somalia is enduring a dire drought that has caused widespread crop failures, raising food prices and disrupting livelihoods. According to the World Food Programme, nearly a third of the country’s population, 6.5 million people, face severe hunger, and 2 million children under the age of five face acute malnutrition.

“Most people who bought vegetables from my stand were people that could only afford to make purchases in shillings. Paying with mobile money means they have to pay more, and most can’t afford to,” says Ahmed.

In a televised press conference, the federal government announced that the rejection of the Somali shilling would constitute a crime and ordered traders and businesses to continue accepting it.

But Jama and others doubt the ruling can be enforced by the fragile state. “The government’s decree to save the shilling is good but we need action to back the directive. There are no police, or anyone for that matter, helping us,” he says.

“What would help would be [for the government] to go to businesses and hold people accountable for refusing to accept the Somali shilling. Even fines would help,” he adds.

Jama leans back in his chair. Across the street, guards stand watch behind mounted machine guns at the ministry of foreign affairs. “Millions are going to suffer,” he says quietly. “More families will be pushed into poverty.”