how do treasury bills work

Is Treasury Bill a Good investment? – How Do Treasury Bills Work and How to Invest in Treasury Bills

Is Treasury Bill a Good investment–How Do Treasury Bills Work

With treasury bill investment in mind, you’d wonder, ‘how do treasury bills work’. Or seemingly, ‘is treasury bill a good investment’. Just to answer the question, Treasury Bill is a very good investment that is secured with zero chance of losing money. Also, the investment profit is paid upfront before the investment begins.

Treasury bills have been classified as one of the Best investments in Nigeria. Since financial analysts have made this classification, lets now have a deep look at what exactly is treasury bills.

I’m assuring you that after reading this piece, neither of these questions will match up enough to bother you.

Even onto the arrival of the abstract future, the investment will remain a bankable way of becoming super-rich in Nigeria. This is not some sort of encouragement but a confirmation that your move to invest in treasury bills is proper. However, lots of questions becloud the idea of investing in treasury bills. For instance, you wonder: ‘is treasury bill a good investment?’ As if this isn’t enough, the question of how do treasury bills work adds up to make your mind arduous. Anyways, as always would be, this page, specifically this piece will answer the important questions behind treasury bills investment.

If treasury bills investment seems strange to you like a word, then you’re missing out. And if this is a case of ignorance on your side, I’m sorry – the bank is profiting off your ignorance. Nonetheless, this piece will be the spotlight to help you of being demonetized by the bank. Simply allow this info to submerge you as it introduces the know-how on treasury bills; a short term investment.



In this piece, there is a provision of answers for how do treasury bills work. Likewise, you wouldn’t get to ask, ‘is treasury bill a good investment’. Why? For the reason that after reading, you’ll possess so much knowledge – enough to school another questioner about treasury bills.


is treasury bills a good investment?

Treasury Bills investment for lazy investors


What are Treasury Bills?

Also called T-bills, treasury bills, in investments, come under short term kinds of investments. This is an alternative investment in which the investor can’t cash in or cash out at convenience. It is one of the most secure investments because it is a government-owned investment.

Treasury bill is a short-term autonomous obligation that bears no interest. It is an investment with low risk and this owes to its rapidity in sales and liquidation. As an investor, you’ll enjoy lumps of benefits, beginning from the liberty to decide when your money matures.

In this sense, an investor will have to wait for treasury bills to attain maturity before liquidation. As an investor in treasury bills, what turns and how good or poor the dimension of your money does not concern you. What matters most, which often not a thing of worry is the maturity of the investment you make. This oftentimes erases the stress of having to think of how do treasury bills work.


Are Treasury Bills Risk-Free?

Is it risk-free?

Of course, treasury bills pose almost a zero risk. This points towards the same direction as the question, ‘is treasury bill a good investment?’ Without a doubt, treasury bills are free from any blot of risk. While planning or about to cash in on treasury bills, risk fright should be your least worry. This is a reality that the passiveness of treasure bills facilitates.

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Risk susceptibility or freedom is always the first point of concern for every investor in an investment. However, the ideality in a virtual investment like Treasury bill contrasts such distressing concern. Enough write-ups may never be enough to entail the risk freedom of treasury bills. But a brief overview showing how to invest in treasury bills should do the job. It should be able to affirm the response that treasury bills are risk-free and good investments to opt into.

Below is a rundown section of how you can invest in treasury bills. The section below will provide more answers to the question of risk in treasury bills. How would this be? As you’ll read down on the section, it will highlight the swiftness of the process of investing in treasury bills. Therefore, it will help you determine even more about treasury bills, other than risk, which is of course near-absent.






How to Invest in Treasury Bills

Investing in treasury bills comes with lengthy questions as a company. These questions vary and range from how to invest in how do treasury bills work. One of the chief concern for every treasury bills investor is how it works. This is a question that emanates the fears of whether treasury bills are good investments.

It is also on this note that investors burden their minds with the question, ‘is treasury bill a good investment?’. Well, sometimes a simple explanation answers a question that demands an elaborate answer. In truth, ‘treasury bill is an excellent investment’ that is more than trial worthiness. Look below for how to invest in treasury bills which will equally answer lots of questions on your mind.


Investing in Treasury Bills Process


Investing in Treasury Bills in Nigeria

Essentially, this section focuses on how to invest in treasury bills. Treasury bills don’t operate as social media algorithms. This, therefore, implies that its mode of operation isn’t at all complex, but linear and vivid. To make very clear, how it works, to you, I’ve adopted a Promethean approach to render simplification. Here we go!

When individual P decides to invest in treasury bills, he wakes up to a new day. With his clothes on, he walks down to a bank or certified financial institution of his choice in Nigeria running the investment package. Individual P informs the bank of his interest in investing in treasury bills and he is given a form to fill. After filling the form, a submission follows. Individual P may choose to pick the discount rate the bank fixes or set the discount rate he wants. And should his rate exceed the fixed-rate, his bid will suffer rejection from the CBN.

When individual P decides on a discount rate that pleases him, he makes procession and signs up. During the sign-up, he chooses a maturity period which is usually between 90 and 365 days. Once the signup is complete and individual P agrees to the deal, he is debited but with the agreed percentage as a remnant.

Now, let the assumption be that individual P wills to invest ₦500,000. The federal government will not debit him all the money. Instead, an agreed percentage will be leftover. This is because the government pays the interest up-front. For instance, if individual P’s discount rate is 9%, his up-front interest will be ₦45,000. I.e. ₦455,000 but the government will pen ‘I Owe You’ as ₦500,000 for the period of maturity.

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Minimum Investment in Treasury Bills in Nigeria

Before March 2017 in Nigeria, investing in treasury bills directly required at least ₦10,000. During this period, banks and other legal financial institutions could serve as the determining body for the investment rate. Beginning from March 2017 however, the auction price went from ₦10,000 to ₦50,000,000. This is reciprocity, barred retail investors from the treasury bills market.

However, if you do not have as high as ₦50,000,000, there is still a way to invest your money. In this way, your money will go through the bank of your choice. The only demerit of investing in treasury bills via the bank is the bank charges which is minimal. You can deduce here that despite being a demerit, it’s still not a discouraging reason.

Since the Central Bank of Nigeria wills for ₦50,000,000, the bank, in turn, creates a portfolio from customer-investor money. The method that the bank does this is quite easy as they simply pool together, investor funds. These funds are then added up to the CBN amount of ₦50,000,000 and assigned various tenors – 91 days, 182 days and 364 days respectively. At the end of each tenor, you’ll be paid by the bank and they’ll charge a service fee. As it stands, the question, ‘is treasury bill a good investment’ gets a ‘yes’ for an answer. Because, as seen here, even the bank guarantees your payout when tenor reaches.


Advantages of Treasury Bills

As a form of investment, treasury bills bear features that make it unique from other forms. On this note, after answering to how do treasury bills work, you’ll want to look out for the necessary merits it encompasses.

  • The minimum investment rate differs on banks but can be as low as ₦500,000 from the ₦50,000,000 issued by the CBN.
  • The risk level of investing in treasury bills is pretty low.
  • Interest payments are made upfront.
  • Treasury bills investments do not incur taxes.
  • Safety is guaranteed in treasury bills investments as the Nigerian government fully backs it.
  • It’s a short term venture and requires just a few months to liquidate.






Disadvantages of Treasury Bills in Nigeria

Just like the merit list above, certain things do put treasury bills investments a few feet down. Here are a few things to note about treasury bills before signing in.

  • It can’t be rolled over.
  • An investor can’t sell treasury bills before maturity.
  • The return is quite low.


Where to Buy Treasury Bills in Nigeria

You can buy treasury bills from Nigerian banks and other certified institutions. If you’re buying from banks in Nigeria, it’s recommended that you bargain or agree on the bank’s discount rate.

You can equally proceed to Treasury Bills Nigeria to make your purchase. The discount rate on the attached site is 10% and you can invest with the minimum of ₦100,000 and the maximum of ₦5,000,000. Interest is paid upfront and the platform does not support the following:

  • Investment rollover.
  • Liquidation before end of the tenor.

Does this look like a good investment for you? Do well to use the comment section and tell me if you like this investment. If you need more information on other investments, do well to let me know.

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