Treasury bills rate in Nigeria – In one of our previous blogs, we discussed Federal Government Bond in Nigeria and its benefits.
Today we will be about treasury bills in Nigeria and one this that people does not appear to know about Treasury Bills and Federal Government Bond is that the difference between the two only lies on a thin weak line.
To that effect and in other to provide a better understanding on all about treasury bills in Nigeria, we will be discussing the following sub topic:
- Meaning of treasury bills in Nigeria
- Investing in Nigeria treasury bills
- Secondary market treasury bills Nigeria
- What is Treasury bills rate in Nigeria?
- Advantages and Disadvantages of treasury bills in Nigeria?
Meaning of treasury bills in Nigeria
Treasury Bills in Nigeria is a Federal Government discounted fixed income security instrument issued by Debt Management Office of Nigeria (DMO) on behalf of the federal government in other to raise funds from the public for their various financial dealings, projects, budgets and budget deficits.
This debt instrument has a maximum tenor of one year only (divided between 91 days, 182 days and 365 days) while bonds have tenor from 2 years to 45 years. That is the only difference between treasury bills and bonds in Nigeria.
Through this too, the federal government becomes ready for it financial obligations. This is issued twice in a month with exception to any months that have five weeks.
This will make them issue Treasury bill up to three times per month.
Investing in Nigeria treasury bills
Buying treasury bills in Nigeria or Investing in treasury bills in Nigeria is very easy and simple. The followings are first to be considered when doing the Nigeria Treasury bill investment.
- What is the minimum amount for Treasury bills in Nigeria?
- Is Treasury bill taxable in Nigeria?
- Can you lose money in Treasury bills?
- Is treasury bills a good investment
- How much does it cost to buy the T bill?
The minimum investment in treasury bills in Nigeria or simply put minimum amount for treasury bills in Nigeria is N50m which means that treasury bills amount ranges from 50m and above.
Treasury Bills like every other Federal Government instrument is not taxable and it is as secured as the entity that is giving it. This means that you cannot lose money in treasury bills because it is as secured as the country and the government that issues it. The risk of treasury bills in Nigeria is zero.
This is one of the reasons Treasury bill is referred as a good investment.
Finally, we have to make it clear here that it costs nothing to invest in treasury bills. All you need to do is to walk into your bank and make your request in writing.
Since you are investing N50m and above, your bank will take your request to Central Bank Nigeria (CBN) to bid on your behalf at your own rate or at the rate of the bank depending on which you choose.
At Central Bank Nigeria (CBN), your Bank will do two things:
- Present their bid request as a Bank (which we will discuss later)
- Present the bids of all their customers that invested between N50m and above.
- If their bid as a bank fails at first request, they can amend their rate and rebid immediately since they are physically present in the Central Bank Nigeria (CBN) bidding floor.
- This is not always so for those primary investors that invested between N50m and above when they chose a rate different from their Bank’s rate.
- Once their rate is rejected, their bid will be returned to them since they were bided for and they were not on the bidding floor of Central Bank Nigeria (CBN) to renegotiate.
- At this they may wish to revisit Central Bank Nigeria (CBN) trading floor with improved bid on the next Treasury bill auction in Nigeria Apex Bank or trade on their banks rate as gotten from CBN on the same date their bid was rejected. This now takes us to the next in line which is…
Secondary market treasury bills Nigeria
This is a market where Treasury Bill that has already been traded on the Primary Market during the moment of T Bills Nigeria first sales on the CBN trading floor are re-traded.
For a clearer understanding of this market, let’s do it this way. The minimum amount one can invest is N50m and above right?
From the above, one can deduce that conditions that makes Primary market a difficult place for everyone’s visit and which also denies one access at time of one’s greatest need exist. These conditions include:
- Not all willful investors has N50m and above. Many has amount far less and are still willing to invest in Treasury bills
- Failed bids of Primary Investors who cannot wait for the next Treasury bill auction in Nigeria Apex Bank trading floor.
- Unfavorable financial conditions which warrant the resale of Treasury bill before maturity date.
- Desire to purchase T bills in Nigeria / Nigerian t bills before Primary market sales date.
Due to the above reasons, a Secondary Market was introduced to solve all of the above needs.
When a Treasury bill is requested, a rate is attached to it. Let’s go more practical here. Mr. Obi wants to request for a T-Bills of N250M from his bank at a rate of 10%.
The following will apply to this request in the course of its processing:
- Mr. Obi must have funded his account with the bank with the value he is requesting in T-Bill and also handed over his written request to his bank.
- During debit, the rate of 10% will be applied upfront: 10/100*250M equals 25M
- This means that the total sum of N225M will be debited from the customer’s account for a T-bill request of N250M. This means that N250M is discounted to N225M.
- The sum of N25M left in the account is the interest gained upfront at the rate of 10%.
- Upon maturity the customer’s account will be credited with N250M and not the debited value of N225M.
- This allows the investor to reinvest the Interest on the T-bill either into (secondary market option, fixed deposit, or other forms of investments he may deem fit to.
- This means that the customer must have gained the sum of (Principal – N250M; Interest – N25M; Interest from Interests – N??? depending on value gotten).
- This can also be calculated using Treasury bills calculator in Nigeria which answers the question how are treasury bills calculated / how are treasury bills calculated Nigeria?
You must have heard the question, “can treasury bill be terminated before maturity in Nigeria?” The answer is yes the Nigeria Treasury bill be terminated before maturity in Nigeria.
All you need to do is approach your bank and discuss it with them. They will only add a rate to rate you bought it at with serious consideration to treasury bills rate in Nigeria today.
From these, you will be charged on the days left in the t-bills which you are expected to pay from the interest you have gained upfront.
What is Treasury bills rate in Nigeria?
Treasury Bills rate is the index (a divider or multiplier for a given time) that determine gains, loss and price per Treasury bill as determined by the Debt Management Office of Nigeria (DMO) and the Central Bank Nigeria (CBN).
Before a rate is agreed, the Debt Management Office of Nigeria (DMO), will consider the following:
- The current liquidity in the system
- The interest rate environment rate of at which similar instrument is trading in the market
- The profit expectation margin of the government with respect to that particular T-bills
Through this, a rate is adopted from which deals are done. All the above gives insight on You can get it easily using Nigerian treasury bills calculator.
That is why you have heard things like:
- Treasury bills rate in Nigeria 2019 for Treasury bills in Nigeria 2019
- Treasury bills rate in Nigeria 2018 for Treasury bills in Nigeria 2018
- Current treasury bill rate in Nigeria
- Nigeria treasury bill rate today
Advantages and Disadvantages of treasury bills in Nigeria
The advantages of treasury bills include:
- It serves as a fund raiser for the government
- It pays the investors upfront interest
- It allows the investors the opportunity to re invest their interest since it is earned upfront
The disadvantages of treasury bills include:
- It has a high minimum amount of N50m which makes one eligible to trade at the floor of the CBN at ones chosen rate.
- Due to the above, investors with fund below N50m are at the mercy of banks for good rates.
Are you looking for where to invest your hard earned money without risk? Treasury bill is one of them and Treasury bills rate in Nigeria makes it easy for intended invest.
Why not rush and invest now??
You can also read: Federal government bond
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