1. What are treasury bills? 

Treasury Bills in Nigeria are short-term debt instruments issued by the Federal Government through the Central Bank to provide short-term funding for the government as a way of managing liquidity in the system through the Open Market Operations on short-term basis. They are usually issued for tenors of 91 days, 182 days and 364 days at the primary market auction held fortnightly by the Central Bank of Nigeria. Primary Issue of 91 days and 182 days are offered bi-monthly, while 364 days bills are offered monthly.

The Rates are offered on a discount basis and are often referred to as risk-free rates. The interest rate (stop rate) at the auction is not fixed but fluctuates based on demand and amount offered by the CBN. The discounted value is invested by the investor as the interest is earned upfront. It simply means that the Government is obliged to pay the holders of T-bills a fixed sum of money on the maturity date of the securities. When you invest in T-bills, you are lending your money to the Government in exchange for interest payments.

Minimum investment into the Nigerian Treasury bill is N1, 000.00. Nigerian Treasury Bills are zero-risk and re-discount-able through licensed Money Market Dealers. They are traded actively in the secondary market among st Banks and Discount houses on an outright basis.  It has an active two-way quote secondary market which provides additional liquidity for all the primary auctions. Nigerian treasury bills can be used as collateral for borrowing by organizations or individual.

2. My Experience: How I invested in Treasury Bills:

I sent below mail to my account officer a week before the planned auction date. Please note that i have requested to use ‘best rate in bidding on my behalf ‘ to ensure that my bidding will not be filtered off based on requested interest rate. However, if you are keen on a particular minimum interest rate, you should state your rate in the mail

Then after the auction, i got below mail from my bank. In the mail, note the following; effected date, face value, tenor, discount rate, maturity date and Custody fees. The Discounted value was deducted from my account while the face value was paid back after Maturity date implying the 13.25% discount rate for my investment of 1295000. The interest was paid upfront. However, from the mail content, my bidding was not tendered by my bank at the primary market as my bank could not meet the minimum bidding of 50 Million Naira but was sourced successfully at the secondary market.

3. Frequently asked questions (FAQs):

– When Are Nigerian Treasury Bills Issued? Nigerian treasury bills are issued according to a quarterly issuance calendar that is published on the CBN website .

– When is the auction conducted? Primary auctions are held bi-monthly on Wednesday, while the issuance and settlement is done on Thursday.

How Is The Auction Conducted? Through a competitive bid where you have to specify the price (to be expressed in terms of percentage yield) that you are willing to pay for the T-bill. You may or may not be allotted the securities after the auction, depending on how good your price is relative to the prices submitted by all the other competitive bidders. A lower yield represents a more competitive bid as the bidder is indicating that he/she will accept a lower interest rate.

What Role Do Primary Dealer Banks Play In A T-bill Auction? Only Primary Dealer banks participate directly in the auctions; the total amount of their bids will reflect not just their own bidding interest, but also those bids taken on behalf of investors. The Primary Dealers are appointed to play a role as specialist intermediaries in the money markets. Primary Dealers are obliged to provide liquidity in the market by quoting prices on all issues under all market conditions.

What Is The Minimum Investment Amount? The minimum investment amount is N1,000 (One thousand naira), and you can invest in multiples of N1,000

Are there related charges? Yes, the PD will charge investors an administrative fee of 0.0125% of the face value of the investment.

Where Can I Purchase T-bills? You may purchase SGS at primary auctions (held through Primary Dealers bi-monthly) or in the secondary market (through daily sales between PDs in the money market).

Can I Sell My SGS Before Maturity?

You can sell over the counter with any Primary Dealer. Prices may change from day to day according to market conditions, and it is important to note that you may not be able to sell for the same price that you paid for them.

How Do I Calculate The Returns On Investment?

Treasury bills are issued at a discount. Therefore, the yield that you get upon the maturity of the bill is the difference between the purchase price and the maturity price.