Why Invest In Treasury Bills?
Feb 20, 2018
Treasury bills are short-term debt instruments with maturities of 91 days, 182 days and 365 days issued by Federal Government through the Central Bank of Nigeria (CBN) every two weeks at the primary auction.
T-Bills rates are currently high compared to what is obtainable in fixed deposit or savings account. These Bills are issued on a discount basis; you get your income on investment upfront. For instance if you are investing N1,000,000 @ 15 per annum for 364 days, the interest figure, in this case which is about N149,589.04 will be credited to you immediately while your principal will be returned at maturity.
However the upfront interest also can be invested along with the principal, thereby giving a higher return. The income from investing in T-bills is the difference between the discounted (amount invested) value and the nominal value (also called face value or maturity value).
Nigerian Treasury Bills are zero-risk and can be re-discounted through licensed Money Market Dealers i.e banks and financial institutions. It can also be used as collateral for borrowing
TBills have an active two-way quote secondary market which provides additional liquidity for all the primary auctions.
Institutions or individuals can borrow using Nigerian Treasury Bills as collateral. It is relatively liquid.
Client’s Treasury Bills will be held with a CBN approved Custodian.
You can invest as low as N50,000,000.00 in Treasury Bills at the Primary Market/Auctions.
The Secondary Market Standard volume is N250,000,000.00.
However PAC Asset can buy from the secondary market volumes from N1,000,000.00 and above
Note Below: Currently Treasury bills rate ranges between 13% to 18% per annum, depending on the tenor/length of investment