How to invest in treasury bills in Nigeria
April 25, 2022
How to invest in treasury bills in Nigeria. I’m here to teach you yet another interesting topic that will guarantee your financial success if towing the part of financial literacy is what you desired.
The rate at which Nigerians embraced financial securities in the past decade or more is no longer what’s obtainable today probably owed largely to global economic melt down that hit the world at large in 2006 or so.
However, I deem it necessary to educate you on the impact of financial security to your life at whatever level you may think of.
Ever since the capital market crumbled, few Nigerians with reliable information on investment have continued to rake in profit from this same market and are not ready to stop anytime soon. “Who no want make money?”
What differentiates you from these few individuals is information, no wonder they say “information is power” and you beat that.
If you are ready to join the band wagon, kindly go through this article and do yourself a great favour by imbibing on the guidelines and instructors therein.
I’m committed to showing you how to make money investing in treasury bills in Nigeria.
WHAT IS TREASURY BILLS?
Treasury bills are short-term maturity promissory note, issued by the federal government to the public as a primary instruments for raising funds to undertake its projects and as well regulating money supply in circulation. The federal government normally issues treasury bills through the Central Bank of Nigeria (CBN). Unlike the usual shares, treasury bills in Nigeria is normally traded for less than one year, typically three months, you will get back your funds.
How possible is it that the federal government will borrow money from the public when the oil money is there? The truth is that federal government can run out of fund, like it’s not a news that at some points in this country last year the federal government could not pay salaries not to talk of releasing allocations to the State government. Some many factors led to that as such one of those things that could compel the federal government to borrow from the public.
Also Read: How to save money for your child’s future
BENEFITS OF TREASURY BILL
1. Treasury bills in Nigeria is risk free, this is an investment you cannot be afraid of. It doesn’t go bad, you are lending your money to the federal government who must pay back at all cost.
2. Interest on treasury bills is paid up front: You are being paid the interest immediately you invest, then wait for the maturity date to collect your face value. Name any security that will pay you interest upfront on investment and I will wait. That’s the beauty of treasury bills in Nigeria.
FEATURES OF TREASURY BILLS IN NIGERIA
1. there’s a discount while interest is earned upfront.
2. It’s used to raise short term funds to bridge seasonal/temporary gaps between receipt and expenditure of government.
3. It is a negotiable instrument: This is a document that contains guarantee or promise to pay a specific amount of money to a person or entity in possession of the instrument, whether on a specified date or on demands.
4. Assured yield and low transaction cost: Interest is guaranteed with less effort, it’s a duty bound investment.
5. Fixed rate of interest
6. Maturity date, this is the date the investment tenure is expected to expire, usually 91 days, 182 days and 364 days.
7. Treasury bills in Nigeria are now issued in electronic form.
ADVANTAGES OF TREASURY BILLS IN NIGERIA
Short term investment: The investment period is usually short within 91, 182 and 364 days.
Risk free: You can happily go home and sleep with your two eyes closed.
Can be used as loan collateral: You can use the treasury bills certificate to obtain loan from the bank as collateral. This is most acceptable collateral by banks.
It encourages individual investors: You can venture into it without much thoughts.
Monetary policy tool: Government uses treasury bills in Nigeria as a way of moping up funds in circulation from the public to reduce/ control inflation.
HOW LONG CAN MY INVESTMENT LAST IN TREASURY BILLS?
It’s usually within 91, 182 and 364 days.
WHEN IS TREASURY BILLS SOLD IN NIGERIA?
It’s usually sold bi- weekly.
HOW DO YOU CALCULATE TREASURY BILLS IN NIGERIA?
I= P × R/100 ×T/365
Example: Say you invested N1000000 at the rate of 12% for 364 days
I= 1000000 × 12/100 × 364/365
= 1000000 × 0.12 × 0.99726027
It then stands that on your investment of N1000000 one million naira at the rate of 12% for 364days you will receive N119,671.232 immediately as your interest. This is one secret business the bank will never tell you, you can actually make a lot of money investing in treasury bills in Nigeria.
WHAT IS THE MINIMUM AMOUNT I CAN INVEST
You can invest from N10,000. Initially it was scrapped, but it has returned back to status quo. In fact you can invest any amount now, but make it reasonable as your profit depends on investment.
CAN INDIVIDUAL BUY TREASURE BILLS IN NIGERIA?
Yes you can buy treasury bills as an individual.
WHAT ARE THE RATES OF TREASURY BILLS IN NIGERIA?
The worst rate can go for 12%, meaning it could be above that.
ARE TREASURY BILLS TAX FREE?
Yes, you are not expected to pay tax on your profit.
WHERE CAN I BUY TREASURY BILLS IN NIGERIA?
Just like other instruments, it has primary and secondary offer.
The primary market is through CBN which you can access through the bank.
While the secondary market is across the counter, you can access this through your stock broker.
Definition of terms.
1. Face value: This is the amount paid to the holder at maturity.
2 Discounted value: Present value of a future sum of money to be paid at a stipulated future date.
3. Interest: Difference between the face value and the discounted value.
4. Tenor: The amount of time left for the payment of the face value of the instrument. Tenure is usually expressed in days.
5. Yield: The annual income earned from an investment, expressed usually as a percentage of the money invested.
6. Rediscounting: The act of exchanged for an amount of cash adjusted to reflect the current interest rate.
7. Discount rate: The interest rate of the instrument.
8. Mark to Market: Current market value of specific maturity. This is influenced by macro economic factors and is published daily by the FMDQ.
Conclussion: Having learnt all these secrets about investing in treasury bills in Nigeria, I hereby advise you to take a positive step towards enhancing and guaranteeing your financial future. The bank will never let this secret out to you, why not take advantage of a rare opportunity. Happy financial freedom in advance. Visit any https://www.skyebankng.com for further inquiry.
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Raphael Orji is a freelance writer, professional blogger and a content marketing consultant. I work with small businesses, startups and entrepreneurs in building their brand image with high quality blogging and content marketing strategy.
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