Gambia on Sunday warned banks and businesses against hoarding foreign cash, saying stockpiling currency was illegal and causing prices to rise.

The tiny west African nation uses the Gambian dalasi, which in recent years has lost value against major currencies, including the US dollar.

"Speculators and some unscrupulous businesses are creating an artificial shortage of foreign exchange, especially of the United States dollar, thereby causing its unprecedented appreciation against the Gambian dalasi with the sole intention of hiking the prices of basic commodities and causing hardship to the people of the Gambia," the presidency said in a statement.

It said the "criminal trend" was unjustifiable and warned of "drastic action" against any person or business found to be hoarding foreign money or speculating on its value.

The presidency also announced an immediate freeze on shipping US dollars overseas and warned of tough penalties against anyone "not playing by the rules of honest trading practices".