INVESTING IN TREASURY BILLS 2020 | Treasury bills in Nigeria and all you need to know

Treasury Bill is a popular investment among business-oriented people. It is a Government guaranteed debt instrument issued by the Central Bank of Nigeria, CBN on behalf of the Federal Government to finance expenditure. The CBN also uses treasury bills to control money supply in the economy.

Treasury bills in Nigeria and all you need to know

After reading this post, you should learn about Treasury bills in Nigeria, how they're calculated, how to invest and all you need to know.

Treasury bills are in other words, short term bonds issued by the Federal government through the Central Bank of Nigeria to meet short term funding for the government. Banks, trusts, institutions, firms, and even individuals can purchase these particular bonds.

The Central Bank of Nigeria issues the bonds for 91 days, 182 days, and 364 days at a primary market auction and investors come to place their bids to buy them, the lowest bidders carry the day.

Treasury Bills as good investment

Before an investor makes any investment, he must first determine whether the available business opportunity is viable. He should establish the strengths and weaknesses of that particular opportunity, and then make a decision based on the findings. On the basis of this, we shall now look at the advantages and disadvantages of investing in treasury bills.


  • A good source of steady stream of income.
  • Treasury Bills are a good investment outlet for your free and disposable cash.
  • T'Bills are good investments for people who wish to save.
  • They are also tax free.
  • Treasury Bills are very liquid and can be converted to cash quickly.
  • The investment is risk-free because of the guarantee of the Federal Government
  • Investors can use it as collateral when applying for loans in banks Interest is paid upfront.


  • Returns are most often than not, a little above the inflation rate
  • Investors cannot roll over investments.
  • They have to incur a cost each time they make a bid.


T-Bills can be purchased either in primary or secondary markets.
A primary market involves a direct purchase from CBN through a public auction carried out bi-weekly.
On the other hand, the secondary market is when an investor buys it from an existing holder, and this could be through a bank or stockbroker.

Banks and Other Financial Institutions usually hold Treasury Bills, and there are two ways of investing in this opportunity as a secondary market.

An investor could decide to buy Treasury Bills in Nigerian banks or get it through stockbrokers. Investment via banks is simple and the most reliable. Investors need to get in touch with their banks and they will be put through. However, the bank determines the minimum bond you can buy.
Whereas some offer N50,000 as a minimum, others go as high as N500,000, but this should not worry you because you can opt for an alternative route.

Some banks pull together resources from many investors to raise enough money and buy these bonds. You could get in touch with such and make your investment.

Another option is to invest through Online Broker which is less stressful as you can register and go through the entire process at your convenience. However, most brokers accept a minimum of N100,000.

How to calculate Treasury bills in Nigeria 

Remember that the Federal government issues Treasury Bills at discounted prices and upon maturity, the government repurchases them at full quotation.

The interest rate, otherwise called stop rate, is the bid rate you will receive for the money you wish to invest. For example, an investor would expect a rate of, say, 15%. This rate could be different from those of others who want to buy the same bond. How then is the bid rate determined? The Central Bank of Nigeria selects bids that are below the marginal rate. The marginal rate is the minimum average rate of submissions made within that particular bid window. If the marginal rate is 11%, then all submitted bids below it are accepted.

For example, a person buys a N500,000 Treasury bill at a discounted rate of N400,000 for 364 days. After the purchase, the Federal government writes an IOU of N500,000 and pledges to pay after 364 days. Upon expiry of the set timeline, the government buys back at full price. The interest rates for these bonds are not fixed. The Central Bank of Nigeria and the demand for the T-Bills determine the stop rate.

Investors putting their money aside would want to know how much they should expect at maturity. It is only possible if you know how to calculate your return on investment. Check the example below.

Suppose you buy a 364-day T-Bill worth N500,000 from a stockbroker or your bank at an interest rate of, say, 15%. It could be more or less.

You can calculate the upfront payment using the formulae below.

Interest = Principal × Time × Rate/100

Principal = N500,000

Time = 364 days (equivalent to 1 year)

Rate = 15/100

N500,000 × 1 × 15/100 = N75,000

This, therefore, means that you will get paid N75,000 at the start of your investment and the remaining N425,000 is remitted to the Central Bank of Nigeria.

Note that your investment is N425,000 and not N500,000 because you get N75,000 back immediately your investment is approved.

How then do you determine your actual rate of return?

Rate = (Interest × 100)/ (Principal x Time)

(75000 × 100) ÷ (425000 × 1) = 17.6%

This is how you can determine your interest rates on Treasury bills in Nigeria.

Tenors of Treasury bills 

T-Bills are issued for a specific time tenor. In Nigeria, three tenors are used. An investor could invest for 91 days, 182 days, or 364 days. The auctioning exercise is carried out by the CBN every two weeks and it is open to willing investors.

Investing in Treasury bills in Nigeria is simple. However, as an investor, you need to familiarize yourself with the business first before you invest on it.

Your bank is also there to give you the necessary guidance.

In our next article, we shall look at the frequently asked questions on investing in treasury bills.

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