INVESTING
Looking for a relatively low-risk way to grow your savings? Nigerian Treasury Bills offer an alternative to traditional savings accounts, allowing you to earn returns by lending money to the Federal Government.
But how do they work, how much do you need to start, and where can you buy them?
Treasury Bills are short-term government securities that allow Nigerians to invest for 91, 182, or 364 days. You buy them at a discount and receive their full face value when they mature, with the difference representing your earnings before applicable charges and taxes. They're generally considered low-risk investments, but returns vary depending on prevailing rates and when you invest.
How Do Treasury Bills Work?
When you invest in Treasury Bills, you're essentially lending money to the Federal Government for a fixed period.
Unlike regular savings accounts, Treasury Bills don't typically pay monthly interest. Instead, they're purchased below their face value.
For example, you might purchase a Treasury Bill worth ₦100,000 for ₦90,000. When it matures, you receive ₦100,000, earning ₦10,000 before any applicable charges or taxes.
The amount you earn depends on the rate available when you invest and the duration of the investment.
How Much Do You Need to Start?
The minimum investment depends on where you purchase Treasury Bills.
The primary market, where newly issued bills are auctioned, generally requires larger investment amounts.
However, individual investors can access Treasury Bills through the secondary market using participating banks and authorised investment dealers. Some providers offer entry amounts starting from ₦100,000.
Minimums vary, so confirm the requirements with your preferred provider.
How to Buy Treasury Bills in Nigeria
Getting started is relatively straightforward.
1. Choose a provider: Contact a commercial bank or authorised securities dealer that offers Treasury Bills.
2. Check the available rates: Ask about current investment rates, minimum amounts, maturity periods, and fees.
3. Choose your investment period: Select 91, 182, or 364 days, or an available remaining maturity in the secondary market.
4. Complete your investment: Provide the required identification and account information, review the quotation, and confirm your purchase.
When your Treasury Bill matures, the agreed face value is paid through the applicable settlement arrangement.
Are Treasury Bills Safe?
Treasury Bills are backed by the Federal Government, making them relatively low-risk compared with many other investments.
However, they're not completely risk-free. Inflation can reduce the purchasing power of your returns, and selling before maturity could result in a less favourable price.
Rates also change, meaning the return available today may differ from what you can earn when reinvesting later.
Frequently Asked Questions
Can I invest ₦100,000 in Treasury Bills?
Yes, some providers offer secondary-market Treasury Bill investments from ₦100,000. Check the current minimum with your bank or investment dealer.
Can I withdraw before maturity?
You may be able to sell your Treasury Bills in the secondary market, although the selling price will depend on prevailing market conditions.
Are Treasury Bills better than fixed deposits?
It depends on the rates offered, fees, investment duration, and your need for access to funds. Compare both options before deciding.
What Should You Do Next?
If you're considering Treasury Bills, start by checking current rates with your bank or an authorised investment dealer.
Compare the expected returns, fees, and maturity periods before investing.
Treasury Bills can be a useful way to diversify your savings, but choose an investment period that fits your financial needs.
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