Treasury bills in Nigeria (T-Bills): Meaning and How to Invest in it

Consider purchasing Treasury bills if you are searching for the most secure and risk-free investment option. What makes it the most secure option for financial investment? Reuters Business Share for the simple reason that it has the unwavering support of the Nigerian government, which makes it risk-free.

What is Treasury Bill in Nigeria?

Treasury bills, or T-Bills, are a kind of short-term government debt issued by the Central Bank of Nigeria (CBN) to meet the country’s short-term borrowing needs and/or deficit spending.

The money market is one way the government may borrow money from the public in the near term. Typically issued for 91 days, it serves as a confirmation of the government’s obligation to pay the bearer interest and principal on any debt owed to them.

The Central Bank of Nigeria (CBN) uses Treasury Bills in its Open Market Operation (OMO) to regulate the money supply in the country. The commercial and financial banks may buy them.

As opposed to other investment options, Treasury bills are completely risk-free. Moreover, it is easily convertible into cash.

While Treasury bills don’t provide a very high rate of return, they are excellent for preserving wealth. Also, it’s important to know that Treasury bills are always sold at a discount and pay no interest each month for as long as the bill is valid.

Treasury bills have a set maturity of either 91 days, 182 days, or 364 days. After the bill’s due date, the Federal Government of Nigeria would pay the full amount, including all interest and principal that had built up.

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Treasury bills are a highly liquid kind of currency. They can be purchased from the financial industry’s primary or secondary markets. They serve as valuable collateral and have many applications. They have a high resale value and a lengthy secondary market life.

Anyone in Nigeria, including private citizens, businesses, banks, insurance companies, and government and financial organizations, may buy Treasury bills from the federal government. The CBN holds auctions twice a month to sell them.

Maybe you’re thinking about how much money you could put into an investment. The smallest amount you may spend is #50,000, and the highest is #50,000,000. The amount you’re really able to spend, though, will depend on the bank.

Investing in Treasury Bills is advantageous since the interest you receive is not subject to taxation and is sent directly into your bank account.

Nigeria Treasury Bills Interest Rates

In Nigeria, the bid rate, also known as the spot rate, is used to determine the interest rate on Treasury bills a Nigerian wants to buy. Treasury bills come with a variety of interest rates, so plan accordingly.

Treasury bills rate in Nigeria 11.57%-14%.

Please note that you will be requested to specify your bidding rate or leave it to the bank’s discretion when you request a treasury bill form.

You or your bank must choose a bid rate that is lower than the CBN’s marginal rate. Successful bidders get interest payments paid immediately.

Understanding the concept of a marginal rate. In the context of a bidding period, the lowest acceptable rate is known as the marginal rate.

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Take note that economic risk and oil prices are major factors in the return on Treasury bills. When oil prices are down, and interest rates are increasing, it makes sense to invest in Treasury bills.

Calculating your Return On Investment (ROI)

For simplicity’s sake, let’s say you want to invest a total of 500,000 Naira in treasury bills for 364 days at 13%; your return on investment (ROI) would be 65,000 Naira, and it will be given to you in full at the outset. This means you invested 435,000 naira, and the 500,000 will be paid in full at the end of the term.

How to invest in Nigeria Treasury Bills (T-Bills)

  • To invest in Nigeria Treasury Bills through main auctions you need the opening of a brokerage account (either with Bank or investment house).
  • Provide your details in an application or send by email.
  • Deposit funds into your account before the day of opening auction, at a minimum of the amount approved.
  • Primary auctions for T-Bills are conducted every Wednesday or bi-monthly.
  • If your offer is accepted, your broker will contact you the next business day (Thursday) and deduct the amount from your account. Information on the Custodian where your investment is held will be included in the investment letter you will receive.
  • Don’t forget, Nigeria Treasury Bills has a maturity of 90, 180, and 364 days.
  • Treasury bills are a discounted instrument that pay interest in advance.
  • When a Treasury bill matures, you get its fact value fully.

Nigeria Treasury Bill: The Top 12 Institutions to Invest In

When looking to invest in Nigerian Treasury bills, the following banks come highly recommended:

  • Zenith Bank
  • Guaranty Trust Bank (GTB)
  • First Bank of Nigeria
  • Stanbic IBTC Bank.
  • Union Bank
  • FCMB Bank
  • Sterling Bank
  • Access Bank
  • Ecobank
  • Fidelity Bank
  • Unity Bank
  • United Bank of Africa (UBA)
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The banks listed above offer Treasury Bills, which have a set interest rate and term. Treasury bills are issued for 91 days, 182 days, or 364 days at a time.

Advantages of Investing in Nigeria Treasury Bill

  • Repurchase Transactions may use Treasury bills as collateral securities.
  • Treasury bill interest is exempt from federal tax.
  • Customers are given the option to choose the repayment term and interest rate that works best for them.
  • Treasury notes are easily traded and have high liquidity.
  • The Nigerian government guarantees the full redemption of Treasury bills at due date, making them a risk-free investment option.
  • Investing in Treasury bills is a great way to ensure a regular flow of cash.
  • Savers should consider purchasing Nigeria Treasury bills as a sound investment option.
  • Treasury bills are highly liquid and may be exchanged to cash fast.
  • When opposed to other investing options, Treasury bills do not incur any transaction fees. 11.
  • To keep your money safe, invest in Treasury bills.
  • If you have cash available and ready to invest, you should put it in Treasury bills.

Disadvantages of Investing in Nigeria Treasury Bill

  • Investment returns are vulnerable to inflation.
  • Interest rates on Treasury bills are low.
  • Treasury bill investments are non-renewable because bidders must pay a fee each time they offer to buy or sell.

Conclusion

Reuters Business concludes that Treasury Bills are a risk-free investment option with the full trust of the Federal Government of Nigeria behind them.

A return on this investment is not expected to take place over a lengthy time frame since it is a short-term one. The Internal Revenue Service does not tax interest income.

Instead of letting your money sit around doing nothing, you could contact your bank or stockbroker to invest in Treasury bills.

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