Treasury Bill | How To Invest And Buy in Nigeria
There are things you need to know about individual businesses before investing in them.
The painful thing is that many fail to do their thorough investigation and lack knowledge of what they want to invest in before going into it.
As an investor, you should also be able to establish that the business is viable and profitable.
You are verifying the strengths and weaknesses of any business opportunity before concluding how to start your investment.
An opportunity like the treasury bill is a significant investment. You should not be surprised about this opportunity.
Why? It is because the treasury bill is a substantial investment in Nigeria that anyone can invest. After all, it is safe, and the government endorses it.
What to know about treasury bills in Nigeria
Treasury bills are issued on behalf of the government by the Central Bank of Nigeria. The government realizes cheap money from the masses and makes use of it to fund their expenses.
The Treasury bill is a medium for the Central Bank to realize extra money in the economy.
The good news is that it is less risky because the government endorses it, and any member of the public can invest in this ample opportunity.
The advantages outweigh the disadvantage.
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The CBN issues bonds for 91 days, 182 days, and 364 days at the primary market auction, where investors come to place their bids to buy them. The lowest bidders carry the day.
Investing in Treasury Bills
The first step to investing in treasury bills is knowing where and how to buy them. You can either buy your treasury bill from :
- The Bank
- Stockbroking firm
It is easier done online using an online stockbroking platform. You need to register and complete the processes remotely; most stockbroking firms only allow a minimum of N100,000.
Meanwhile, Commercial Banks have different investment thresholds, so each bank has the minimum they allow.
Some of the Nigerian banks offer a minimum investment as low as N50,000, while some offer a minimum of N1,000,000.
The process is all about you depositing money into your stockbroking account.
You should also request a specific maturity date, i.e., the date you get your ROI, 30 days,52 days, 182 days, 364 days, the investment from your account will be deducted upfront, and interest paid to your bank account.
Calculating your treasury bill profit
It is essential that you know how to calculate for your upward interest to ensure clarity.
Let’s assume: I buy N5,000,000 worth of TBills from my bank or stockbroker at the rate of 18% that would mature in 364 days.
To calculate the Upward payment
Interest(I)=PxRxT /100,where P=Principal, R=Rate, T=Time/Duration I. e 5,000,000x1x18/100=900,000
N900,000 is what I get paid at the initial stage of the investment, while 4,100,000 is remitted to the CBN.
It means I am just investing N4,100,000 since I have already been paid N900,000
To calculate my true yield then R=Ix100/PxT 900,000×100/(4,100,000×1)=22%
22% is the true yield of investment
You have a choice of investing the interest you got upfront.
Assuming I want to do a short tenor (time), it is essential to note that the shorter the date maturity, the lower the return on investment. If you are trying to calculate for 30 days, 91
days, and 182 tenors, the time in the equation above becomes 30/365,91/365 or 182/365
Note: it will be advisable to check the current treasury bills in Nigeria to create familiarity, understanding, and awareness.
Do not forget that the advantages outweigh the disadvantages, and investors with low capital could invest in this because it is secure and profitable. My advice is that you take a step now. I hope this was helpful.