September 6, 2022
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All You Need To Know About Investing In Treasury Bills In Nigeria

Would you like to put money aside and earn significant interest returns in only a few weeks or months? You might acquire treasury bills, which are a popular and easy-to-access investment.

Because they are backed by the federal government, Treasury bills are one of the safest investments available. They are thought to be risk-free. Many other governments throughout the world utilize them as well.

1. What is the definition of a treasury bill?

Treasury Bills are short-term debt instruments issued by the Federal Government through the Central Bank to provide government with short-term funding. They are the most liquid money market securities by nature, and they are backed by the federal government’s guarantee.

They are usually issued for tenors of 91 days, 182 days and 364 days at the primary market auction held fortnightly by the Central Bank of Nigeria. At the auction, the interest rate (stop rate) is not fixed, but changes depending on demand and the amount supplied by the central bank. The difference between the value of the bill and the amount you pay for it is called the discount rate and is set as a percentage.

2. What is the purpose of a Treasury Bill?

In essence, the federal government offers treasury bills at a discount for maturities ranging from 91 to 364 days. The government buys the notes back at full price at the conclusion of the maturity period. Consider the following scenario: You purchase a 182-day 200,000 treasury note at a discounted rate of $80,000.

Nigeria’s Federal Government signs a 200,000 IOU and commits to pay it back in 182 days. You do not receive monthly interest payments; instead, your money is returned to you when the bond is purchased back at full price. Over the course of the 182-day term, the T-Bill pays an interest rate of 11% (20,000/180,000 = 11%).

 

3. Government Bonds vs. Treasury Bills

Treasury bills and government bonds are two forms of debt instruments that the government might issue to raise money in the financial market. Treasury bills are issued when the government requires funds for a short length of time, but government bonds are issued when the government requires debt for a longer period of time, such as five years.

T-bills (Treasury bills) have a maximum maturity of 364 days and are commonly referred to as T-bills. As a result, they’re classified as money market instruments (money market deals with funds with a maturity of less than one year). Longer-term treasury products are sometimes referred to as “notes” or “bonds.”

4. How to acquire Nigerian Treasury Bills

If you want to invest in Treasury Bills, here’s how to do it.

Treasury bills are usually held by financial institutions including banks. Treasury bills can be purchased through your bank, and the process is straightforward. You will be put through if you contact your bank. The dealer determines the minimum number of Treasury Bills you can purchase. Some banks need a minimum deposit of $50,000, while others require a minimum deposit of $500,000.

All You Need To Know About Investing In Treasury Bills In Nigeria.
All You Need To Know About Investing In Treasury Bills In Nigeria.

T-Bills can be invested for 91 days, 182 days, or 364 days. This means that if you invest for 91 days, your money will be invested for three months. If you invest for 182 days, your money will be ready in six months, and so on.

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