Investment Opportunities in Nigeria

by - August 18, 2018

Investment Opportunities in Nigeria 
(The Money series)
Treasury bills 1

There are lots of investment opportunities out there that the average Nigerian can take advantage of to achieve a financially stress-free life; unfortunately many of us are not aware of such opportunities, leaving us at the mercy of scammers who offer juices investment solution only to scam us of our hard earned money.

In the days ahead I will try to talk about a few of them, I will try to make it as simple and short for easy understanding and you can always ask your questions in the comment section, I'd be sure to answer every one of them.

The first investment opportunity a lot of Nigerians overlook or aren't aware of that we would be discussing is the treasury bills.

Treasury bills

Treasury bills are short-term debt instruments considered by many to be the most risk-free investment. Treasury bills are money market instrument used by the government (CBN) to regulate money flow (liquidity) in the economy.

So let’s say government feels too much money is in circulation which often leads to a rise in inflation rate (high increase in the price of goods and service), government through CBN will sell out treasury bills at high rates thereby attracting many people to purchase it and reduce the amount of money in circulation and if the amount of money in circulation is low, CBN will do the reverse which is to offer treasury bills at low rates to discourage people from buying and instead spend the money they have thereby increasing the money in circulation.

Treasury bills are classified as a money market instrument.
Money market instruments are investments that usually mature within a year.
Treasury bills are sold in two markets

Primary market  and
Secondary market

The primary market simply means you are buying the one being sold by CBN directly. At the primary market treasury bills are sold in three tenures
91days(3 months),
182days(6 months) and
364days(1 year).
they are usually sold every two weeks on Wednesdays except for rare occasions.

While secondary market means you are buying the one which someone else already bought but wants to sell out, so the tenure can be 35days, 100days, 200days or any number of days left till the maturity of the treasury bills.

Treasury bills are sold by CBN directly but as an individual, you have to go through banks, asset management firms and other regulated financial institutions to buy Treasury bills.

The new regulation from CBN says you need a minimum of 50m to buy treasury bills from the primary market but however finance institutions collect any amount they deem fit and add together with theirs and buy treasury bills for everybody interested, some banks collect minimum of 5m(for personal reasons )while some other finance firms collect as low as 100k. So you may need to inquire to know the minimum of any firm you are about to deal with before you proceed.

Please to avoid stories that touch on your hard earned money I will advise you check Here to be sure that any finance or Asset management company you are dealing with is properly regulated by the Securities And Exchange Commission.

One of the amazing benefits of investing in treasury bills is that it is TAX-FREE!


I said TAX-FREE.

Next on the line of benefits is the option of upfront interest.

When you invest in treasury bills you have the option of collecting your interest immediately and wait till maturity to collect back your capital.

It’s done through a system of discounted rate, so let’s say I invest 100k on treasury bills for 364days at 10% that means my interest is 10k, 10k will be deducted from the 100k and paid to me while 90k will be invested, by maturity the 90k will grow back to 100k which I invested. (You may want to read it again slowly if you don’t understand).

Then for those who would rather wait till maturity to collect both interest and principal you also have a reason to smile

You will enjoy a rate tagged yield which is usually higher than the discounted rate.

Id stop here for now so you can digest the information written above concerning investment opportunity in Nigeria, particular concerning treasury bills.
On the next series we would continue our discussion and more legit investment opportunities in Nigeria would be revealed.

Written by
Economist and an investment adviser.
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Until next time.

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