Treasury Bills investment in Nigeria (2021): All you need to Know

Are you in search of a secure and accessible form of investment? Perhaps you would want to rake in good cash within just a few weeks or months of investment.

Investing in Treasury bills could be perfect for you if you responded in affirmative to the above lines. Here is the complete details of all you need to know about Treasury bill investment and some winner tips for 2021.

treasury bills in nigeria

WHAT IS A TREASURY BILL?

In the first place, a Treasury Bills is a debt instrument issued by the Federal Government through the apex bank, the Central Bank. This issuance is done by the government to provide short-term funding for the government projects.

Therefore, Treasury Bills are backed by the guarantee of the Federal Government and yet, it is considered the most liquid money market securities.

HOW TREASURY BILLS WORK

The working principle of Treasury Bill is pretty simple. The way it works is that the Federal Government issues the treasury bills at discounted rates to interested investors, for a maturity period usually between 3 months to 1 year.

At the end of the period specified by the agreement, the government will pay you back the actual amount the amount they borrowed from you. Follow it from the analogy below:

Let us assume you bought a 3 months N300,000 treasury bill at the cost of N270,000. What it means is that at the end of 91 days, the Federal Government will pay you N300,000. However, you will not receive monthly interest for the period of the Treasury bill.

WINNER TIPS FOR TREASURY BILLS INVESTMENT

The best tips I can share with you concerning how to get it right on the investment are answers to some important queries you should be aware of. There is no trick to it, but knowledge is all you need.

How to buy Treasury bill in Nigeria

If you wish to apply for Treasury Bills in Nigeria, you will need to visit your bank and request for the TB’s form. Fill the form with your personal information and of course, the amount you want to buy and your bid rate (stop rate).

Who can buy Treasury bills?

Those who can buy treasury bills include individuals, firms, trusts, institutions and banks. So if you belong to any of these outlined categories, you can go ahead to invest in T-Bills.

When is Treasury Bills sold?

The TB’s are usually sold every two weeks, as announced by the apex bank, CBN. It is usually published on the CBN’s website and on national dailies. To be on a better side, you can request your account officer to inform you ahead of the issuance.

Treasury Bills Rate in Nigeria

Bid rate is the interest rate a bidder set to receive from an investment. Stop rate on the other hand, refers to the maximum interest rate issued or preferred by the central bank of Nigeria, out of all bids made within a bid window. However, all bid rates above the stop rate will be rejected whereas those below the stop rate will win.

What is the duration for Treasury bill investment?

Treasury Bills in Nigeria are usually offered for tenors of 3 months, 6 months and 1 year by the CBN at the primary market auction, which is held every two weeks.

Can you sell Treasury bills before its due time?

Definitely, you can sell your T-Bills before the due maturity period. This is usually in the Over the Counter (OTC) market.

The treasury bills may be of high demand and you could want to take that opportunity to make gain in a short period of time, you could sell it to one of the teeming bidders. Of course, the price at which you will sell it will be determined by the forces of demand and supply.

Rolling over your investment

Although, the Central Bank does not automatically roll over investment, you can give your bank that duty to roll over your principal into the next round of the investment.

Your bank can also roll in the profit you made into this new tenor. This will help keep you constant in the market while you accumulate more gain.

What is the current interest rate on treasury bills in Nigeria?

Well, since January 2021, the interest rate on T-bill has been between 12% – 14%.

THE BENEFITS OF INVESTING IN TREASURY BILLS

The following are what you will benefit by investing in Treasury Bills:

  • Treasury bills are not taxable and as such, tax will not be deducted from the profits you will make.
  • You can use Treasury Bill as a collateral in case you need a loan from a financial institution.
  • Treasury bills are very liquid, which means they can be converted to money quickly
  • Since Treasury Bill investment is guaranteed by the Federal Government, it is said to be risk-free.
  • If you wish to save your money, Treasury Bill is a great option to consider
  • If you have a free cash or disposable cash, Treasury Bill is a very good investment outlet to take opportunity of.

In the midst of the above benefits, we must fail to acknowledge the fact that one of the disadvantages of investing in Treasury bills is that it gives low yield. For the reason that it is considered safe, the stop rate (marginal rate) does not usually turn in so much profit.

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