Have you considered treasury bills as an excellent investment opportunity for your hard earned funds? I’m willing to bet that your response would be no. My charge to you today is that it is one of the best investment opportunities around, and one of the least understood. It is my intention to use this write-up to introduce you to the opportunities that investing in treasury bills can make on your financial net worth.
Treasury bills can be basically defined as government securities, debt instruments issued by the Central Bank of Nigeria that mature in one year or less. In other words these are backed by the Federal Government and are used to provide funding for government deficits. They are commonly used by governments to fund capital projects like roads and infrastructure and help in the control of money supply in the economy.
These government securities can be invested in either at the primary or secondary market. In the case of the former treasury bills are auctioned off through competitive bids made by primary dealers and non-competitive bids by government agencies. It is important to note here that commercial banks in Nigeria can assist in getting your bids across and investing on your behalf. All you need to do is consult them.
Based on the maturity period we have 3 types of treasury bills – those that mature in 91 days, 182 days and 364 days.
The interesting thing about this investment vehicle is the slew of benefits that one stands to gain by investing. The first is that it is completely risk free! An investment where you make gains at no risk because the treasury bills are backed with the guarantee of the Federal Government of Nigeria. You cannot go wrong investing in it!
Secondly, the rate of interest treasury bills command is far higher than any interest you can receive in most other investment vehicles such as fixed deposits or high yield savings accounts. The rate of interest is determined based on demand and supply of funds in the money market.
Treasury bills currently provide investors with between ten – fifteen percent interest depending on the tenor which is usually less than one year. It is not determined by some banker’s committees meeting to regulate rates to be applied thereby making investors get a higher yield.
One of the most attractive benefits is that interest payments can be made in advance! Your interest is calculated and deducted from your investment and paid to you up front!
For example, if you decide to invest N100,000 for 91 days at 10 percent interest the bank will only take N90,000 from you! There is hardly any investment that can match this.
Another wonderful benefit of treasury bills is that it is tax-free. Investment in government securities backed by the Federal Government is exempted of taxation. The returns are seen as income and exempt from state and local taxes. This means that the bulk of the initial investment and interest remains in the hand of the investor.
Fifth, these instruments are highly liquid and can easily be converted into cash at any time at the instance of the investor. It is extremely vital when investing to understand the modalities it would take to convert your funds back especially when the need arises often out of the blue. These instruments can even be redeemed before maturity date at a fee. On top of that treasury bills can also be used as collateral.
In the area of divesting your portfolio it pays to also invest in treasury bills. Most people may have varying investments in mostly risk full portfolios. The addition of a guaranteed risk-averse model helps to balance one’s portfolio so that it is not only full of risky instruments. You end up getting a mix of both.
Finally, one can invest in treasury bills for as low as One Hundred Thousand Naira with the support of your bank. This means the entry requirements into this investment affords many people with the opportunity. You are required to fill a few forms and fund your account, thus you can take part in this opportunity in little or no time once an auction cycle has been completed. Your up-front interest can even be reinvested for a greater yield on maturity.
Now that you know what are you going to do about it? I expect you to contact your banker after reading this and plug into this investment option. This is another income stream that you can easily add to your portfolio that is sure to generate income for you. Welcome to the world of risk-averse income where you don’t need to put too much effort into growing your wealth!
Kenneth Doghudje
