This is a simple manual for monetary investment into treasury bills.
It clarifies the significance of treasury bills and how you can invest in it
It likewise clarifies how the interest is earned and when it is paid to an investor
Also features the advantages of putting resources into treasury bills
What are Treasury Bills?
Treasury Bills are government ensured debt instruments issued by CBN for use by the federal government. The CBN likewise utilizes treasury bills to control cash supply in the economy
How are Treasury Bills Sold?
Treasury Bills are sold out bi weekly by the CBN. Purchasers are asked to qoute bids following which the average lowest minimum bid is selected.
Where can I buy Treasury Bills?
Treasury Bills can be purchased through any official merchant. The most straightforward this days are through banks' treasury are through banks’ treasury bill mobile application. Such as the Sterling Bank's I-invest programme.
What is the Minimum Amount I can Buy?
Previously, you could purchase for as low as N10,000 and in multi ple of N1,000 from there on. Be that as it may, this was increase to N50,000,001 in 2017. This article clarifies how you can purchase treasury bills on the off chance that you don't have up to N50 million. However, the base for the I-invest sterling bank application is N100,000.
When is it typically sold?
Treasury Bills is sold on Wednesday as reported by the CBN. The CBN declares issuances in their sites and in the pages of national dailies. You can likewise ask your financial officer to inform you in front of an issuance.
How Might I Buy Treasury Bills?
To purchase Treasury Bills you should approach your bank asking for a treasury form. You fill the form with your own data additionally declaring the sum you need to purchase as well as your bid rate.
With the introduction of banks' treasury investment application, you are only required to fill a signup form once.
What is the treasury bill bid rate?
The bid rate generally called your STOP RATE is the probable loan cost that you are willing to invest. For instance you can demonstrate a loan fee of 10% as your normal rate. Your offer rate will undoubtedly be unique in relation to that of other proposing purchasers of TB's.
How is the Bid Rate chosen?
The CBN chooses the lowest bid rate you set during your application. The Marginal Rate is the base rate for bids submitted inside an offer window. For instance, if the negligible bid rate for a bid opened Wednesday 27 June is 11% at that point bids falling underneath this rate will be acknowledged and those above rejected.
What it I don't set my bid rate (Imagine a scenario in which I don't have a Bid rate).
In the scenario where you do not set your bid rate, the bank will choose a rate for you. Be mindful that the bank might not choose the best rate for you.
Would I be able to in any case buy T-BILLS if my Bid is rejected?
You can buy TB's from the auxiliary market Over The Counter (OTC) through an intermediary. This is likewise where buyers and dealers of TB's exchange the notes in return for money.
What are the spans and durations (tenor) for the TB's?
Treasury Bills are generally for 91 days, 182 days and 364 days.Knowing this, you can have the CBN hold your money for 91 days, 182 days or 364 days, contingent upon your decision. Be that as it may, the CBN can choose they want to sell Treasury Bills for all the tenor available or either of them.
Would I be able to sell before Maturity?
Indeed, you can sell Treasury Bills before development. As referenced over, this should be possible through the OTC market. The cost at which you sell relies upon the powers of demand and supply.For example a N100,000 face value TB maybe selling for less or more depending on the yield expectation of the buyers. If your face value is trading at a higher price, it means you can sell your treasury bills at a profit as such your N100,000 can sell for N101,000 or more. If your face value is trading at a lower price, it means you can sell your treasury bills at a loss as such your N100,000 can sell for N99,000 or less.
When is the interest paid?
The premium interest component of a treasury bill is paid to you and credited to your ledger. For instance, in the event that you buy a N100,000 TB with a interest of 10% the CBN charges your record with N90,000 all things considered your N10,000 interest is paid upfront. As it matures, you are paid the worth N100,000. The payment of your interest makes your (true_yield) quite high.
What is a True Yield?
Your True_Yield is your Return on Investment. (return for money invested). Utilizing the example above, the yield for the N100,000 is 10%. Because they pay you interest upfront your true yield is actually the N10,000 in interest divided by the N90,000 actually deducted from your account. That is N10,000/N90,000 or 11.11%. This is, thus, higher than the 10% coupon. The True Yield is completely earned when you hold to maturity.
Would I be able to roll_over my investment?
The CBN does not allow rolling over your investments consequently. What you can do is tell your bank to roll over the principal of your investment.And if you wan to enjoy compound gains, you can also mandate your bank to turn in the interest gained from previous investments and reinvest it altogether when the previous T-bill investment is settled.
Are Treasury Bills Safe?
Treasury Bills are one of the most secure types of venture and are upheld by the full confidence of the Federal Government of Nigeria.
Aside from the Interest Rates, what are the advantages?
A decent wellspring of constant flow of salary.
Treasury Bills are a decent investment outlet for your free and discretionary cashflow.
Treasury Bills are great investments for individuals who wish to save up.
Treasury Bills are additionally tax exempt.
Treasury Bills are exceptionally fluid and can be changed over to money rapidly.
They can be utilized as an insurance.
Are Treasury Bills Taxable?
T-bills in Nigeria are not taxable.
Here is a typical misconception about Nigerian Treasury bills.
So a friend called me last week -
Tosin I bought T-Bills
Me: Congratulations, finally, this our financial literacy message is working
But she's upset
I bought T-Bills for N100,000 and they only gave me N3,000 interest what a waste of time and money
They cheated me
They promised me 12percent
So I asked her, over what period of time did you buy it for
She said 3 months
They didn't cheat you
It was apportioned.
So let's talk about apportioning.
When interest rate is mentioned, it's usually for a year unless otherwise stated.
So you need to apportion it
So you say
Interest÷duration of time = monthly rate.
Monthly rate × the time you chose
In this case
12percent÷12= 1percent monthly rate
1percent× 3 months = 3percent
You get just 3percent because you chose it for 3 months
So apportioning is very important.
That way you can calculate your return
Also for the sake of completeness
The longer you hold the Tbill for
The more attractive your return
Those who hold it for 1 year
Those that hold it for 3 months will not get the same rate