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How to Invest in Treasury Bills in Nigeria

The Nigerian government issues short-term debt securities known as Treasury Bills (T-Bills) through the Central Bank of Nigeria (CBN). The government uses them for short-term public borrowing between 91 and 364 days. T-bills are regarded as a low-risk investment choice because the Nigerian government backs them with full faith and credit.

Steps for investing in T-bills in Nigeria:

 

  1. Open a Central Securities Clearing System (CSCS) account
  2. Choose a T-bill auction frequency
  3. Participate in the T-bill auction
  4. Wait for the auction results
  5. Hold the T-bills until maturity

 

  1. Open a Central Securities Clearing System (CSCS) account:

You must have a CSCS account to invest in T-bills. The CSCS is a central securities repository that makes it easier for securities traded on the Nigerian capital market to be cleared, settled, and stored. Contact authorized CSCS account operators, such as banks, stockbrokers, or registrars, to start a new account.

 

  1. Choose a T-bill auction frequency:

T-bills are frequently offered in auctions held by the CBN. Your investment horizon and level of risk tolerance determine T-bill auction frequency. The 91-day T-bill is a good choice if you need a low-risk investment option and have a limited investment horizon. The 182-day T-bill is an excellent option if you want to invest over the next few years. Consider thinking about the 364-day T-bill if you have a long investment horizon.

 

  1. Participate in the T-bill auction:

A competitive or non-competitive bid must be made to participate in a T-bill auction. The number of T-bills you wish to purchase and the yield (interest rate) you are ready to accept must be specified in a competitive offer. The CBN will subsequently distribute the T-bills to the highest bidders. When you place a non-competitive bid, the CBN allows you T-bills at the weighted average yield of all the competitive bids because you did not specify the rate.

  1. Wait for the auction results:

The CBN will make public the outcomes of the T-bill auction, including the allotment amount, allotment price, and weighted average yield. If your bid is accepted, the CBN will credit your CSCS account with the T-bills and debit it with the allocation amount. If your bid is accepted, your CSCS account and T-bills will be deducted.

  1. Hold the T-bills until maturity:

After investing in T-bills, you must keep them until they mature. The Nigerian government will reimburse you for the principal balance of the T-bill and any accumulated interest on the maturity date. The T-bills can either be kept in your CSCS account or sold on the secondary market before maturing.

 

Advantages of investing in T-bills in Nigeria:

  • Low risk: T-bills are considered a low-risk investment option as they are backed by the full faith and credit of the Nigerian government.
  • High liquidity: T-bills have a high level of liquidity as they can be easily bought and sold in the secondary market.
  • High returns: T-bills offer competitive returns compared to other short-term investment options, such as bank deposits or money market instruments.

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