Your Ultimate Guide to Nigerian Treasury Bills

What are Treasury Bills (T-Bills)?

Treasury Bills (T-Bills) are short-term financial instruments that are issued by the Central Bank of Nigeria with maturity periods ranging from 3 months to one year. They are debt instruments that are fully backed by the government and considered very safe investments.

Maturity on Treasury Bills

They are usually held ranging from 91 days, 182 days to 365 days. As such, the maturity period also ranges within the stated period of 91days, 182 days and 364 days depending on your choice. However, the CBN can decide to sell bills for all the tenor available at the same time or either of them.

The Tenure of Treasury Bills in Nigeria

• Three Months: This is the least tenor you can invest in. Interest from this tenor will be considerably lower than other tenors because of its short duration.
• Six Months: This is the most popular among the tenor rates because of its fair interest rate, especially when purchased from investment bankers.
• Twelve Months: This is the most extended duration of tenor you can invest in, and it lasts for a year. It is the best tenor to money you won’t need for a long time as it yields a higher percentage of interest.

T–Bills Interest Rate

Typically, they can be bought either in the primary or secondary market of the Nigerian financial market. The interest rates on treasury bills in Nigeria vary depending on the amount invested, the tenure of the bill as well as the market you are buying from.  

For example, the Central Bank of Nigeria as a player in the primary market offers a minimum investment of N50m in t-bills with an interest rate between 3% to 5% per annum. Some commercial banks provide as low as N100,000 investment with an interest rate between 3% to 12%.

Tax Considerations On T-Bills

In 2011, the federal government in its bid to encourage more investments issued the Company income tax exemptions on short term government securities and bonds. The income earned from the investments in t-bills is exempted from tax deduction.

How To Purchase T-Bills 

They are under the control of financial institutions (banks or stockbrokers). Investing in treasury bills will require filling out a form with your personal information with the amount you are willing to invest as well as your bid rate. Mostly, the minimum amount of treasury bills you can buy depends on the dealer.

What Is The Minimum Amount Of T-Bills I can Get?

Most of the times the minimum amount you can get depends on the dealers. Some buy treasury bills as a group of investments, while others buy as a single investment for one person.

When Are T-Bills Sold?

Treasury bills sales occur on a bi-weekly basis as announced by the Central Bank of Nigeria (CBN). They notify the general public of the issuance through pages of print media or their websites. You can also ask your bank officer to inform you.

Factors that affect The Prices of T-Bills

1. Maturity Dates: These dates often influence the prices of treasury bills. Sometimes, the longer you hold the bills the better the prices.
2. Market risk Involved: Treasury bills are an investment with little or no risks. However, there are still some market risks that can influence the pricing of the bills either in the short or long term.
3. Monetary Policy Set By the Central Bank of Nigeria and the rate of inflation of the country.

Terms You Should Be Familiar With

• Treasury Yield: Treasury Yield is the return on an investment expressed as a percentage of investing in treasury bills

• Bill Auction: Bill Auction is an auction held for the sale of treasury bills by the central bank. It is often held bi-weekly

• Bid Rate: Bid Rate is the discount rate that an investor is willing to take on investing in treasury bills.

T–Bills Or Government Bonds?

Bonds and Treasury Bills are the two types of debt instruments that the government uses to raise funds in the financial market.

Treasury bills or T-bills are issued when the government needs money for a shorter period with a maximum maturity period of 364 days. They are traded in the money market.

When the government needs funds for a more extended period, say like five years they issue Bonds.