How to Invest in Treasury Bill in Nigeria.

In Nigeria there is this common belief that “if you want to be rich, then save your money in the bank”. These kinds of beliefs has made too many Nigerians not to have the investing culture embedded in them but rather prefer to save than invest.

In reality, keeping your money stash in a bank is not advisable (though you can keep the money you need for your day to day activities) but keeping all your penny stashed up in a bank, is risky as inflation keep reducing the purchasing power of the naira and not to mention the bank charges that comes every month in different forms and name that gradually reduces the money in your account.

You may not notice it, but when considering how the purchasing power of the naira has been over a certain period of time, you would observe that it keeps declining. You would notice that one thousand naira note (₦1,000) could buy a lot in the year 2000 compare to now in 2019 when a thousand naira note (₦1,000) is almost worthless –its purchasing power keeps declining.

We can hedge this decline by investing. Investing especially in the Treasury Bill can keep you afloat, let me give an example.

Let’s assume you have ₦100,000, if we decide to save this money in a bank for 2 years without depositing or withdrawing from it. You would find out that after that 2years period the interest on that money will be less than ₦7000* and we know how difficult it will be to have a certain amount of money in the bank without withdrawing from it in a 2 years period. But investing in Treasury Bill will offer you a good interest rate and also a good returns, we aren’t talking about the inflation figures that keeps soaring high, year on year.

Enough of the big talk, lets discuss what Treasury Bill are (also keep in mind that Treasury Bill can also be called T-Bill):

What are Treasury Bill?

Unlike the Federal Government Bonds (FGN Bonds) that are for long term investment usually above a year.

Treasury Bill are short term debt instrument issued on behalf of the Federal Government of Nigeria via the Central Bank of Nigeria.

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Let me further explain this term “Treasury Bill”, consider Treasury Bill as a way the government borrow money from the citizens to fund its operations. Operation may be to funds projects such as construction of roads, infrastructural projects like bridges, trains or to service external debts, pay for budget deficits etc. just name it.

The Central Bank of Nigeria (CBN) also use Treasury Bill to regulate the inflow and outflow of money in the economy, as well as to reduce the inflation rate (note that a high inflation rate is caused mainly by too much money in circulation in the economy).

When there is too much money in circulation, the CBN will issue Treasury Bill to “mop up” excess cash off the financial system and release them back periodically when there maturity date reach, in doing so it regulates the in-flow and out-flow of money in the financial system of the county.

Unlike bonds that are longer in term of maturation date, Treasury Bill are shorter (usually within 91 day to one year) and are more liquid as they can easily be sold out and converted to cash almost immediately

Since Treasury Bill are issued by the Central Bank of Nigeria on behalf of the Federal Government, they are considered as one of the safest mode of investment as they have the full backing of the Federal Government of Nigerian and the apex bank of Nigeria (Central Bank of Nigeria).

How Can One Buy Treasury Bill?

Buying T-Bill can be purchased in two ways that is either to buy from:

  1. Primary Market
  2. Secondary market

The Primary Market

Buying Treasury Bill from the primary market involves buying through a commercial bank, but around the second quarter of 2017, the Central Bank of Nigeria increased the minimum amount of money that could use to bid for Treasury Bill from ₦10,000 to ₦50 million, which is very high for retail investors like me and you.

Banks brought a method where they could pools individual funds together to meet the minimum amount of money needed to bid for the Treasury Bill on behalf on their clients and the interest earned from this, is shared equally among the contributors based on there individual capital pooled together.

If you wish to buy via the primary market, you just need to go to your bank and ask the customer service, that you are interested in Treasury Bill.

Be persistent as they (bank customer service) would want to discourage from investing in Treasury Bill and advise you invest in there fixed deposit instead, that’s why I tell people to first call the bank’s customer care number found at the back of your debit card and make all enquiries about T-Bill first before going to the bank, so that you wouldn’t be persuade by the bank staffs.

The Secondary Market

Buying from the secondary market is very different from buying from the primary market, as this market involves buying from discount brokers and from other banks; whom had already bought Treasury Bill and are willing to resell to investors in the secondary market or from other investors who bought from the primary market and couldn’t wait for their desired tenors to expire and what to sell it out and get there cash back.

Normally, the secondary market is active all year round unlike the primary market that is only operational when the CBN issues new T-Bill.

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To participate in the secondary market, you need to get a broker from the Nigerian Stock Exchange website or via your bank or the FDMQ and make your enquires.

Who Can Invest In This Treasury Bill?

Anybody can, any member of the public can invest in the Treasury Bill, cooperate organizations can whether public or private, financial institutions just as banks, hedge funds, pension funds and mutual funds can too.

What Are The Benefits Of Investing In Treasury Bill?

One of the benefit of investing in Treasury Bill, is that your profit or interest is paid upfront, so you don’t need to wait still the end of the maturity date to get the interest/ profit or yield.

Example, if you invest ₦100,000 for 365 days at 15% you would receive approximately ₦15,000 upfront, that is the amount that would finally be deducted will be ₦85,000 and after the maturity period you would receive your ₦100,000 back.

Secondly, is the period of the Treasury Bill, it is always within a 1 year period except otherwise indicate by the CBN (which barely happens) and it is totally risk free and tax free, additionally you can use the same Treasury Bill as a collateral to collect short-term loan from your bank

How long can one hold unto a Treasury Bill?

You can hold unto Treasury Bill for a period of 91 days, 182 days 364 days as issued by the Central Bank of Nigeria. What that means is, if your request or bid is successful in the primary market you would choose how many days you want to hold the Treasury Bill before it expires.

One other thing you should keep in mind is that the higher the period you choose the higher the rate that is a 92 days period for Treasury Bill might have a yield rate of 10.92% while a 182 days period might be having a rate of 13.10% and 364 days period at 16.50%: So you see the higher the tenor the higher the rate.

Where Are Treasury Bill Sold?

As I said earlier, Treasury Bill are sold or auctioned in the primary and secondary market. You can contact your bank first to know if you are eligible to buy T-Bill from them, if not then the best shot is to buy from the secondary market through a broker.

Do I Have To Pay Tax On The Profit Made From Treasury Bill?

Since T-Bill are short term debts issued on behalf of the Federal Government by the CBN. Taxes are not paid, same goes for the Federal Government Bonds –it is not taxable, so you get back your capital and interest at the end on the month.

How Are T-Bill Interest Paid

Treasury Bill interest are paid upfront that means you receive the interest first, when your money has been deducted from your account.

You would receive the full capital after the maturity date, because you receive your interest before receiving your full capital that creates a term called TRUE YIELD.

What Does The Term True Yield Mean?

The True Yield is the actual value of your profit on your Treasury Bill investment. That is if you hold the Treasury Bill to the maturity period then you get the True Yield on your investment, look at how the profit are calculated below.

How Are The Profit From Treasury Bill Calculated?

One of the misconception new investors have with  Treasury Bill is the interest rate; when they see a certain interest rate let’s say 11.20% for a T-Bill with an tenor of 91 days, they misunderstand the all calculation.

What its really means is that the interest rate (11.20%) is for an annum (a year) and to get the true yield of the profit for that certain period you would need to apply the formula:

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True Yield (Total profit) = P * T * R / (100 * Number of days in a year)


P = principal (capital)

T = period (time)

R = Interest Rate

Let’s assume an investor, invested ₦1,000,000 for 182 days the true yield will be:

True Yield (Total profit) = P * T * R / (100 * Number of days in a year)

True Yield (Total profit) = 1,000,000 * 182 * 13.10) / (100 * 365)

True Yield (Total profit) =  2,384,200,000 / 36,500

True Yield (Total profit) = ₦ 65,320.54

Remember that the above calculation is just an example, you could see rate higher than that.

Are Treasury Bill Secured

Treasury Bill are very secured and the government has to pay their debt on time and T-Bills have the full backing of both the Federal Government and the Central Bank Of Nigeria, that is why the interest rate are low because they are very much safe.


In conclusion, T-Bills are a better way to have your money retain its purchasing power via lending it out vis borrowing it to the Government not only do you get a better return compare to bank’s own interest rate but you got to partake in helping the government.

Many people complain of the rate of T-Bills interest rate being too low and requires a lot of money to get a very good profit and would prefer to invest in high yield schemes or Ponzi scheme. Remember that the Treasury Bills got the assurance from the two most powerful entity in Nigeria –Federal Government of Niger and the Central Bank of Nigeria.

If you find this article fascinating, then please share using the share button below and comment, I would love to hear from you.

*Figures based on hypothesis

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