Explained! How to Invest in the Nigerian Treasury Bills and Make Money

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Looking for a safe investment with good yield?  Then the Nigerian Treasury Bills, TB is for you. Apart from being a safe form of investment with fair yield, Treasury Bills investment is a good way to save, it is tax-free, the investment is very liquid (it can be easily converted to cash), it can also be used as a collateral for loan.

Treasury Bills are short-term government securities issued on behalf of the Federal Government by the Central Bank of Nigeria, CBN to control the supply of money in the economy and to finance expenditure.

Treasury bills investment is an investment that works almost the same way like the usual fixed deposit investment you know. However, in treasury bills investment your interest is paid to you upfront ( at the beginning of the investment ). Also, treasury bills investment offers a higher interest rate than the regular fixed deposit investment.

Some Terms used in Treasury Bills, TB Investment

Before we proceed to explain how to invest in Treasury Bills, you need to understand the following terms:

  • Bid: This is the request or offer to buy into Treasury Bills investment, usually made at the primary or secondary market.
  • Bid/Stop rate: This is the interest rate, usually in percentage, that you have indicated to receive on the principal sum you wish to invest. Your bid rate may be selected or rejected depending on the marginal rate for bids.
  • Marginal rate: This is the minimum average rate of bids submitted within the period when a bid is open. The CBN selects the bid that fall below the accepted marginal rates.
  • Tenor: This is the duration of the investment. This is how long you are willing to keep your money invested in Treasury Bills investment. After your tenor has elapsed, your investment is said to have matured. The tenor is usually in 364 days or 1 year, 182 days or 6 months and 91 days or 3 months.
  • Discount rate, upfront payment and face value: Discount rate is basically the value of upfront interest you receive on the amount you invest in Treasury Bills, while upfront payment in TB implies that your interest on any amount you invest is paid to you at the beginning of the investment. For example, if you buy TB worth N100,000 at 15% discount rate per annum, the CBN will debit your account with N85,000, leaving a balance of N15,000. Then at the maturity of your investment, CBN will still pay you the sum of N100,000 as the face value.  What this implies is that your interest of N15,000 was paid to you upfront. In total, you were paid the sum of N115,000 but the discount rate amount of N15000 was paid to you upfront. Do not forget that a percentage of withholding tax may apply. At some point in 2017, the Nigerian Treasury bills discount rate got as high as 18%.
  • Primary and Secondary Market: Treasury Bills can be purchased at either the primary or secondary market. Primary market is where new issues of securities are sold. The primary market auction is usually bi-weekly. Banks, discount houses and stockbrokers buy Treasury Bills from the primary market and sell to retail investors in the secondary for a profit. The secondary market is where retail investors who do not have the minimum sum of N50 million buy TB. Treasury bills on sale at the secondary market comes from investors who bought previously from the primary market. An individual investor can liquidate his/her investment by selling at the secondary market.
  • True Yield: This is the return on Investment, ROI. The true yield is earned when you hold your investment till maturity. In our example above where you bought TB worth N100,000 at 15% discount rate, the true yield of your investment is N15,000 divided by N10,000, then multiplied by 100. That will give 17.65% as the true yield of your investment, which is higher than the 15% discount rate. As you can see, due to the upfront interest payment in treasury bills, the true yield of the investment is higher than the discount rate.                                                                            At the maturity of your investment, you are only paid your face value, not your true yield. True yield is basically a percentage that helps you appreciate the time value of the interest you made from the investment, considering that fact that you were paid the interest upfront.
  • Minimum allowable amount to invest in TB: In the primary market, the minimum amount you can buy treasury bills is N50million. That is why most people invest in the secondary market where you can invest as low as N100,000. Several brokers or banks have the minimum subscription amount they accept.
  • Roll Over of Investment: You can roll over your investment – usually at the secondary market. While filling the TB investment form, you can indicate in the form to roll over the principal on your TB upon maturity. You can even mandate your bank to reinvest your interest part of your TB upon maturity, thereby benefiting from the principle of compounding.
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How to Invest in Treasury Bills at the Secondary Market

  • Just go to any commercial bank or certified financial broker. Try Stanbic IBTC bank, First Bank or GTB or any bank you have account with.
  • Indicate that you want to buy Treasury Bills. The market usually open by 10am in the morning.
  • You will be given a subscription form to fill
  • You will be asked to open an account with the bank if you don’t have an account.
  • Fund your account with the bank with the amount you which to invest in TB. Ask the bank or broker the minimum subscription amount that they accept. Several brokers or banks have the minimum subscription amount they accept.
  • The broker or bank will inform you the interest rates available for several tenors. Fill and submit the mandate form.
  • After your mandate is executed, the Treasury Bill will be purchased in your name, an investment certificate will be given to you, the discounted value will be debited from your account, but your upfront interest will be left in your account, which you can spend or reinvest.
  • At the maturity of your investment, unless you choose the option of reinvest, your face value will be credited into your account.

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    1. Dear Ojo, discount rates are usually calculated per annum. If you are investing 100k at a 10% interest rate, your daily actual interest would be = (( 10/100) x N100,000) / 365 days = N27.39

      Therefore, if you invest 100k for 91 days at an interest rate of 10%, your actual interest would be = N27.39 x 91days = N2492.49

  1. Good morning Sir, thank you so much for the information.
    My question is, if im investing 200,000 naira at 10% for 91days.
    Apart from the 20,000 naira paid to me upront and left in my account.
    Upon Maturity, i calculated 5473.8 naira as the true yield. Will they add it to the 200,000 naira again.
    Making a total of 205473.8
    Which means for 200,000 invested i gained 205473.8 and 20 000.
    I look forward to hearing from you Sir.

    1. Dear Oluwaseun,
      Thank you for your question.

      True yield just shows in percentage the true value of the money you made from treasury bills investment over a period of time considering the fact that your interest is paid upfront to you.

      It is just a percentage to help your appreciate the time value of money paid to you upfront.

      In your example, when you invest N200,000 for 91 days at interest of 10%, about N195,013 will be deducted from your account.

      Then at maturity, you will only be paid your face value of N200,000 at the maturity of the investment. Don’t forget that tax may apply.

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