Treasury bills happens to be the most risk-free form of investment any person can do in the world today because it is backed by the federal government. Treasury bills are simply known as short term debts instrument that is been issued by the government via the central bank to give a short term financing for the government. It happens to be by its nature as the most trusted liquid money market securities that is backed by guarantee of the federal government. In other word, when you invest your money in Treasury bill, you are borrowing your money to the federal government.
Treasury bills are normally issued in tenors like 91 days, 182 days and in 364 days which is at the primary market auction that is been conducted by the central bank of Nigeria every fortnight. However, it is very important to note that the interest rates at this auctions always fluctuates regularly, they are not fixed interest, it is based on demands and the amount that is been offered by the central banks. Also know that the difference between the amount that you are to pay and the value you get is known as discount rate which is always set as a percentage.
How Treasury Bills Work
It is well known that the federal government gives out treasury bills at a discount amount for the maturity period of time which are between 91 days, 182 days and 364 days and at the end of such time period, which happens to be the maturity period, the federal government through the central bank will buy the treasury bills back at the full amount.
For instance, let us assume you bought a 91 days N100, 000 Treasury bill from the government through the central bank at a discount of N80, 000 and the federal government writes an IOU for N100, 000 and agrees to pay your money back in just 91 days. Note that you won’t get any monthly interest payment from them, but you will make your invested money back when the Treasury bill bond is purchased from you back at the full amount. In this short example, the Treasury bill payment interest is 20 percent interest rate which is supposed to be N100, 000/N80, 000 = 20% interest on your invested money over the period of 91 days.
How To Invest In Treasury Bills In Nigeria
- For any person who is interested in buying a treasury bill from the government, below are ways you can buy it easily.
- Treasury bills are normally conducted by central bank, financial institutions which includes your bank
- You can actually buy treasury bills via your banks and the processes are very simple to follow
- Just work into your bank and tell them you want to buy Treasury bill, they will happily educate you about it
- Some banks have the minimum amount of treasury bills you can buy, some banks offers N100, 000 as their minimum amount, while some are N500, 000 as minimum.
There are no specific requirement for you to invest in treasury bills, both individuals, commercial firms, banks, partnership business can all buy treasury bills.