How to invest in Treasury bills in Nigeria and get money

How to invest in Treasury bills in Nigeria and get money

Would you wish to set aside some money and earn a significant return? Treasury bills in Nigeria are all you need to make extra cash. These are the safest bonds around the world that assure investors a risk-free investment.

How to calculate Treasury bills in Nigeria

Image:, @Terkura Mastell
Source: UGC

Treasury bill is a popular term among business-oriented people, and you could seize this opportunity and become one as well, but before then, you need a proper understanding of these investment opportunities.

Many governments around the world use Treasury bills to raise or control money within their economies. Therefore, ambitious investors take advantage of such bonds to make more money for themselves. It is only possible to invest in Treasury bills if you know what they are and where to find them.

Treasury bills in Nigeria 2019: Everything you need to know

Treasury bills are short term bonds issued by the Federal government through the Central Bank of Nigeria to meet short term funding for the government. Banks, trusts, institutions, firms, and even individuals can purchase these particular bonds. The Central Bank of Nigeria issues the bonds for 91 days, 182 days, and 364 days at a primary market auction and investors come to place their bids to buy them, the lowest bidders carry the day.

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Treasury bills in Nigeria

Image:, @cenbank ng
Source: UGC

Is Treasury bills a good investment?

Before an investor makes any investment, he must first determine whether the available business opportunity is viable. He should establish the strengths and weaknesses of that particular opportunity, and then make a decision based on the findings. Are there any advantages of investing in Treasury bonds?


  1. These short term bonds are very liquid and can be converted to cash quickly
  2. Interest earned is exempted from taxation
  3. The investment is risk-free because of the guarantee of the Federal Government
  4. Investors can use it as collateral when applying for loans in banks
  5. Interest is paid upfront

Disadvantages of Treasury bills in Nigeria

  1. Returns are most often than not, a little above the inflation rate
  2. Investors cannot roll over investments. They have to incur a cost each time they make a bid

Buying Treasury bills in Nigeria

T-Bills can be purchased either in primary or secondary markets. A primary market involves a direct purchase from CBN through a public auction carried out bi-weekly. On the other hand, the secondary market is when an investor buys it from an existing holder, and this could be through a bank or stockbroker.

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Treasury bills in Nigeria 2019

Source: UGC

Banks and other financial institutions usually hold Treasury bills, and there are two ways of investing in this opportunity as a secondary market.

An investor could decide to buy Treasury bills in Nigeria banks or get it through stockbrokers. Investment via banks is simple and the most reliable. Investors need to get in touch with their banks and they will be put through. However, the bank determines the minimum bond you can buy. Whereas some offer N50,000 as a minimum, others go as high as N500,000, but this should not worry you because you can opt for an alternative route.

Some banks pull together resources from many investors to raise enough money and buy these bonds. You could get in touch with such and make your investment.

Using an online broker is another way. It is less stressful as you can register and go through the entire process at your convenience. However, most brokers accept a minimum of N100,000.

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How to calculate Treasury bills in Nigeria

Remember that the Federal government issues Treasury bills at discounted prices and upon maturity, the government repurchases them at a full quotation. For example, a person buys a N300,000 Treasury bill at a discounted rate of N200,000 for 364 days. After the purchase, the Federal government writes an IOU (I owe you) of N300,000 and pledges to pay after 364 days. Upon expiry of the set timeline, the government buys back at full price. The interest rates for these bonds are not fixed. The Central Bank of Nigeria and the demand for the T-Bills determine the stop rate.

Anyone putting their money aside would want to know how much they should expect at maturity. It is only possible if you know how to calculate your return on investment. Check the example below.

Suppose you buy a 364-day T-Bill worth N300,000 from a stockbroker or your bank at an interest rate of, say, 15%. It could be more or less.

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You can calculate the upfront payment using the formulae below.

Interest = Principal × Time × Rate/100

Principal = N300,000

Time = 364 days (equivalent to 1 year)

Rate = 15/100

N300,000 × 1 × 15/100 = N45,000

This, therefore, means that you will get paid N45,000 at the start of your investment and the remaining N255,000 is remitted to the Central Bank of Nigeria.

The figures above should tell you that your investment is N255,000 and not N300,000 because you get N45,000 back. How then do you determine your actual rate of return?

Rate = (Interest × 100)/ (Principal x Time)

(45000 × 100) ÷ (255000 × 1) = 17.6%

This is how you can determine your interest rates on Treasury bills in Nigeria.

How often are Treasury bills auctioned?

T-Bills are issued for a specific time referred to as tenor. In Nigeria, three tenors are used. An investor could invest for 91 days, 182 days, or 364 days. The Central Bank of Nigeria does the auctioning exercise every two weeks. The auction is open to willing investors.

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Treasury bills in Nigeria rate

The interest rate, otherwise called stop rate, is the bid rate you will receive for the money you wish to invest. For example, an investor would expect a rate of, say, 15%. This rate could be different from those of others who want to buy the same bond. How then is the bid rate determined? The Central Bank of Nigeria selects bids that are below the marginal rate. The marginal rate is the minimum average rate of submissions made within that particular bid window. If the marginal rate is 11%, then all submitted bids below it are accepted.

Investing in Treasury bills in Nigeria is simple. However, as an investor, you need to familiarize yourself with the business first before you can venture into it. There is more interesting information about these bonds that will impress you. I hope the article was helpful.

Source: Legit

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