Alongside stocks, ETFs, and mutual funds, treasury bills provide an alternative to grow your money beyond the returns of a regular savings account.
Treasury bills (T-bills) are among the most accessible, low-risk investments in Nigeria. They are issued by the Federal Government and backed by the Central Bank of Nigeria. Returns can reach up to 20% per year, depending on economic conditions.
Even though treasury bills are widely available and straightforward, many Nigerian investors misunderstand them. Some believe they are too risky, others find them confusing, and many are simply unsure how to access them.
Treasury bills are government-issued debt instruments that allow you to lend money to the Federal Government for a fixed period, usually 91, 182, or 364 days, in exchange for guaranteed interest payments.
This post explains what treasury bills are, how they generate returns, the actual risks involved, and how to determine if they fit your financial goals.
What Are Treasury Bills?
Treasury bills, or T-bills, are short-term loans to the government, issued by the Central Bank of Nigeria on behalf of the Federal Government. They function as government IOUs.
When you buy a treasury bill, you lend money to the government for a specific period. In return, the government pays you interest. Unlike a bank deposit, you are lending directly to the government.
T-bills are attractive because they are backed by the full faith and credit of the Federal Government of Nigeria, making the risk of losing your principal extremely low.
How do Treasury Bills Work in Nigeria?
Treasury bills are sold at a discount, which can be confusing for first-time investors. For example, if a treasury bill has a face value of ₦100,000 and an interest rate of 10% per year for 91 days, you would pay less than ₦100,000 upfront. When the T-bill matures after 91 days, you receive the full ₦100,000.
Your profit is the difference between your purchase price and the amount you receive at maturity. This difference represents the interest paid by the government for borrowing your money.
For example, you might pay ₦97,500 for a ₦100,000 treasury bill. After 91 days, you receive ₦100,000, earning a profit of ₦2,500 as interest.
Treasury Bill Tenors in Nigeria
In Nigeria, treasury bills are available in three main tenors, or time periods:
- 91-day T-bills: Mature in about three months and are popular with investors seeking quick access to their funds.
- 182-day T-bills: Mature in six months and offer a balance between liquidity and returns.
- 364-day T-bills: Mature in one year and typically offer the highest returns among the three options.
Generally, the longer the tenor, the higher the interest rate. However, rates for all tenors can change based on economic policy and market demand.
Current Treasury Bill Rates in Nigeria
Treasury bill rates in Nigeria fluctuate regularly, driven by factors including inflation, CBN monetary policy, and government borrowing needs.
Recently, T-bill rates in Nigeria have ranged from about 1% to over 20% per year, depending on economic conditions. Rates usually rise when inflation is high, and the central bank seeks to control the money supply. When economic conditions are stable and inflation is low, interest rates tend to drop.
The Central Bank holds auctions approximately every two weeks to set T-bill rates based on market demand. After each auction, the rates are published, allowing you to review them before investing.
A common misconception is that treasury bills are only for the wealthy or large institutions. While there are minimum investment amounts, traditionally ₦50 million when buying directly from the CBN, this has made T-bills less accessible for most individuals.
However, this has changed. Many banks and investment platforms now allow investments in treasury bills starting at ₦10,000. These platforms pool funds from multiple investors to purchase T-bills, making them accessible to everyday Nigerians.
Benefits of Treasury Bills
- Safety and security: Treasury bills are among the safest investments in Nigeria due to government backing. While no investment is entirely risk-free, the chance of government default is very low.
- Predictable returns: Unlike stocks, T-bills provide fixed returns, so you know your earnings in advance. This predictability simplifies financial planning.
- Better than savings accounts: Treasury bills typically offer higher returns than regular savings accounts, especially when interest rates are high. T-bills let you earn returns without locking your funds away for years, as some other investments require.
- Low minimum investments (through platforms): With new financial technology and investment platforms, you no longer need large sums to invest in T-bills.
- Your money is locked in: Once you invest in a T-bill, your funds are inaccessible until maturity. While a secondary market exists to sell T-bills early, it is not always quick or straightforward. Returns: If inflation exceeds your T-bill rate, your real returns may be negative, as your money’s purchasing power declines.
- Opportunity cost: Money invested in T-bills cannot be used for other opportunities. For example, if you invest in a 364-day T-bill at 12% and stocks later yield 30%, you miss out on the higher return. Tax: Interest earned from treasury bills is subject to withholding tax, which reduces your net returns.
How to Invest in Treasury Bills in Nigeria
There are several ways to invest in treasury bills:
Through your bank:
Most commercial banks in Nigeria offer treasury bill investment services to their customers. You can visit your bank branch or use their mobile app to invest. Banks typically have their own minimum investment amounts and may charge fees for managing your T-bill investments.
Through investment platforms:
Digital investment platforms have made T-bill investing easier and more accessible. These platforms handle all the technical aspects of purchasing and managing T-bills on your behalf.
Directly through the CBN:
If you have the required minimum (traditionally ₦50 million), you can purchase directly from the Central Bank, though this route is more complex and better suited for institutional investors or very high-net-worth individuals.
Are Treasury Bills Right for You?
Treasury bills work best for specific financial situations: if you have money you won’t need for the next 3 months to 1 year and want it to earn more than a savings account would provide; if you’re building an emergency fund and want some of it earning better returns while remaining relatively accessible.
T-bills are also helpful if you want to balance your investment portfolio with a low-risk choice. They’re great for short-term goals, like paying school fees or saving for rent, when you want guaranteed returns.
However, T-bills may not be right if you need quick access to your money, want higher returns, and can handle more risk, or if T-bill rates are much lower than inflation.
Conclusion
Treasury bills are not exciting. They won’t give you dramatic stories to share about overnight wealth or life-changing returns. What they offer instead is something equally valuable, predictability, safety, and returns that beat leaving your money idle in a regular savings account.
Understanding how T-bills work is about more than just knowing one investment option. It’s about building your financial literacy and learning to evaluate opportunities based on facts rather than hype or fear.
When you understand the mechanics of how treasury bills generate returns, how government debt instruments work, and what “risk-free rate” actually means, you become a more informed investor across the board.
Treasury bills are one piece of the puzzle. Stocks are another. ETFs, real estate, mutual funds, and bonds each serve different purposes and are better suited to different situations. The more you understand about how each works, the better equipped you are to build a financial strategy that actually works for your life.
