Treasury Bills in Nigeria: All You Should Know

In Nigeria, there are lots of investment opportunities beckoning on everyone who cares to look its way. These investment opportunities are all baited with attractive ROI’s (Return on Investment). One of such investment platforms, which for the most part sounds like a mystery financial jargon, is treasury bills.

It’s a fine investment platform for those seeking to invest or save their money while expecting some interest afterwards. 

This article will simplify treasury bills in Nigeria and you will learn of every other thing you need to know about it. 

Henceforth, it won’t sound like a financial jargon and you’ll be glad to find out how legitimate it is relative to other investment opportunities. 

In this piece, we will be looking at 

• Treasury Bills in Nigeria – A Simplistic Explanation 
• How it works 
• When and Where Can Treasury Bills be bought? 
• What’s the Minimum Amount One Can Buy? 
• When Will I Be Paid after Investing?
• Treasury Bills Vs Government Bonds – The Difference
• Who Can Invest in Treasury Bills?
• Benefits of Treasury bills 
• And lots more 

Treasury Bills in Nigeria – A Simplistic Explanation 

The phrase treasury bills might sound a bit mighty and complicated, but don’t let it scare you. If you’ve ever bought shares from a company or a bank, then you looking at something similar. Treasury bills are debt tools used by the federal government to finance its expenditure. They are issued by the apex bank in the land which is the Central Bank of Nigeria (CBN) on behalf of the Federal Government. These bills have the guarantee of the Federal Government of Nigeria so you have absolutely nothing to worry about. They are the safest forms of investments you can think of. 

Now in simple terms, think of treasury bills as you lending the government money and them paying you back with interest after a certain period of time. This bill is a short term bill and interests will mature at a maximum of 364 days. 

So in a wrap as to what treasury bills – the government needs money to fund its budget and they source it from different media – treasury bills being one of them and you are the lender. Hope that’s pretty clear enough. 

How Does Treasury Bills Work? 

The way treasury bills works in Nigeria is that the federal government issue them via the CBN to buyers at discounted rates. When the maturity period for interest is over, the government then buys these bills back from the buyers at full price. The maturity periods are between 91 and 364 days. This means that you can choose a maturity period of 91 days, 182 days or the maximum which is 364 days. 

The discount the federal government offers here is that a ₦100,000 treasury bill is sold for ₦80,000 or ₦90,000 and a ₦200,000 treasury bill for ₦180,000. The maturity period to get your interest is entirely your choice (91 days, 182 days or 364 days). Interests may vary according to the number of days and you will be afforded the visual pleasure of looking at all the treasury bills and their maturity periods before staking in. 

So when you buy a treasury bill of ₦200,000 for 364 days (remember the discount, you are now buying at ₦180,000), at the end of the 364 days, you get your money back. So you get ₦200,000 instead of the ₦180,000 you invested. There are no monthly interests attached, you only get paid with interest at the expiration of the maturity period you selected. 

In this type of bill, your interest rate is 11% (₦20,000/ ₦180,000) within your selected maturity period. 

When and Where Can Treasury Bills be bought? 

Treasury bills in Nigeria are sold after every two weeks and after the auction bid by CBN is conducted. You can stay informed on when the next bill will be out for sale by checking on the CBN’s website, keeping tabs with national dailies and staying tuned to financial reports on television. You can buy these bids from your banks or any official dealer. It takes just a form to fill and everything gets started. 

What’s the Minimum Amount One Can Buy? 

Formerly, you could buy a treasury bill for as low as ₦10,000. The minimum now is pegged at ₦50,000,000. But if you are investing via a mobile application, the minimum is ₦100,000. Your bank account officer can guide you on how to go about this even if you don’t have up to the required amount. 

When Will I Be Paid after Investing?

You’ll be paid alongside your interest at the expiration of the maturity period you selected. It should be noted, however, that the CBN can choose to put up all three maturity windows for selection or choose any two. What this implies is that the CBN can decide put the treasury bills at 91 days, 182 days and 364 days. You can then choose which maturity period you want. They can, on the other hand, put up just two (182 days and 364 days) leaving you with two options. Hence, if you choose 91 days, you’ll be expecting your money back after 3 months, 182 days after 6 months and 364 days after a year. 

Treasury Bills VS Government Bonds – The Difference 

If you’ve been hearing a lot about treasury bills in Nigeria, you might have also come across the term “Government Bonds”. It’s quite easy to misconstrue both terms. They are the same. The slight difference come in their maturity periods. Treasury bills are for a maximum of one year while government bonds are for a long period of time, say 5 years at a minimum. So when the government needs money for short term projects they use treasury bills while bonds are a go-to point for long term projects. 

Who Can Invest in Treasury Bills?

Treasury bills are for everyone. Whether individuals or corporate bodies, religious organizations, educational institutions and just anyone seeking a safe haven for investment. 

What if I Want My Money before the Maturity Period? 

This is possible and not profitable since you will lose out on the interest rates. To do this, you will have to sell your treasury bill at over-the-counter markets. Over-the-counter markets are where buyers and sellers of treasury bills in Nigeria converge to transact business. In this market, you can buy treasury bills if you fail to buy it through the traditional means. 

Selling your treasury to get back your investment before the expiration of your maturity period is also financially risky. You can sell it for less and make a small profit or even higher and count your loss. It depends on the market tides which is hinged on the forces of demand and supply. So we advise you to make up your mind before investing. 

Can One Roll-Over Investment In Treasury Bills? 

You can roll-over your investment but not automatically like you do with data providers and your subscription. You could simply tell your bank to reinvest the capital for you after payday while you go home with the interest. You can also tell your bank to reinvest just the interest while you part with the capital. This way, you enjoy the benefit of compound interest. 

Interest Rates Vary and are determined by Biddings 

Remember the illustration up there, where we said that you could buy a ₦200,000 treasury bill for ₦180,000 since the government offer them at a discount and then the interest rate is 11%? It’s not always the case. The interest could be less or higher and that 11% could even be the highest. Buyers bid for the rates and the CBN selects the average bid.

So let’s say after the bidding, the average bids fall at 11% (average bid being the most selected by bidders), then that will be the marginal bid rate. If the 11% is the marginal bid rate, any bid rate that falls below it is accepted while any bid that falls above it will be declined. So you can choose an interest rate of 10%, 11% or 9% but not higher than 11% which is the marginal or average bid rate. 

How safe are Treasury Bills in Nigeria? 

They happen to be the safest form of investment here in Nigeria since they are backed by the guarantee of the Federal Government. 

Benefits of Treasury Bills in Nigeria 

Here are some other tangible benefits of treasury bills in Nigeria asides the interest rates 

• They are a consistent stream of income or a side hustle 
• For people who want to save and be certain of interest, this is a great place to start
• There are no taxes involved in treasury bills (no taxation on interests) 
• It is risk-free (the federal government has got its back) 
• They can be used as collateral 
• They are extremely liquid and can be converted to cash whenever the need arises 

Wrapping Up

We are in critical times where the financial market is suffering from trust issues. No thanks to the numerous Ponzi schemes that have duped many. In times like this, the least you can give any investment platform is reasonable doubt. Treasury bills in Nigeria are secure. That’s the highlight. Security is foremost when it comes to investment and that’s what these platforms offer on a platter. So it’s a sweet shot worth taking if you ask me.