Investing in Treasury Bills in Nigeria

Treasury bills should be on your list if you're looking for ways to get a big return on your investment in a short amount of time (weeks, months, or at most one year). One of the safest types of investing in Nigeria is Treasury Bills. This is true since it carries no risk and is supported by the Nigerian Federal Government.

What are Treasury Bills?

Treasury Bills are short-term financial securities with maturities spanning from three months to one year that are issued by the Central Bank of Nigeria. They are regarded as incredibly safe investments because they are government-backed debt instruments.

Treasury Bills are another technique the CBN employs to manage the economy's money supply.

Treasury Bills Maturity

Treasury bills are frequently kept for 91, 182, or 365 days. Therefore, depending on your preferences, the maturity period can range between 91 days and 364 days. Likewise, the CBN is free to sell bills at any given time.

How to invest in Treasury Bills

Treasury Bills can be sold before they expire via the OTC market.

Supply and demand dynamics affect time at which treasury bills are sold. A TB with a face value of N100,000, for instance, can sell for less or for more depending on the expected yield of the buyers.

Usually, treasury bills are bought on the primary or secondary markets of the Nigerian financial market. In Nigeria, interest rates on treasury bills vary according to the amount invested, the maturity date, and the market where the bill was bought.

For instance, the Central Bank of Nigeria, a significant player in the market, provides a minimum investment of N50 million in treasury bills with a 3% to 5% annual interest rate. Several commercial banks offer investments starting at N100,000 with 3% to 12% interest rates.

Previously, you could purchase for as little as N10,000 and then in multiples of N1,000. But in 2017, this limit was raised to N50,000,000. However, N100,000 is the required minimum to use the i-invest mobile app.

Financial institutions (banks or stockbrokers) control Treasury bills. The minimum amount of Treasury Bills you can purchase typically varies by dealer. To invest in Treasury Bills, you must fill out a form with your contact details, the amount you wish to invest, and your bid rate. Normally, the dealer decides how much Treasury bills you can purchase.

The sellers typically decide what the absolute minimum is that you can acquire. Though some people purchase Treasury Bills individually, others purchase them in groups as investments.

Treasury bills are sold every two weeks, according to the CBN. Notifications are sent out via print media and the CBN website. Commercial banks also issue notifications on the sales of treasury bills through bank officers.

Benefits of investing in treasury bills in Nigeria

Financial institutions produce T-bills, which are backed by the Central Bank of Nigeria. Because it is a short-term debt product with a maturity of less than a year and excellent security, there is no risk. Investing in Treasury bills ensures that the money is completely secure. Even in times of economic hardship, the central government is required to reimburse T-Bill investors for their entire investment.

T-bills are offered to investors as a short-term investment vehicle with a 364-day maturity date (highest for Treasury bills). T-bills can be converted into cash during times of crisis because they are a government security and can be sold back on the secondary market.

Other benefits include:

·        You have the option to redeem the yield (interest) on your TB investment, or you can choose to have it automatically reinvested for a greater income.

·        When compared to returns on other money market securities with comparable maturities, the yield or income from the investment is extremely competitive.

·        The risk of default on the securities is nil.

·        Investment returns are tax-free.

·        The securities may be put up as security for quick bank loans.

·        They are tradable bearer securities.

·        It is possible to trade government bills on the stock market.